Not surprisingly, a few major OPEC member nations have said they would go along with oil production cuts. And while that rhetoric has temporarily lifted oil prices over the last few weeks, there’s no way it will translate to reality.
I’ve talked about the demise of oil before. But it rings truer now than ever before.
In fact, oil is going down … and going down hard.
First: OPEC and Non-OPEC members ramped-up output to record levels during the three-month negotiation process.
In fact, December OPEC production is estimated at 34.2 million barrels per day (bpd), 1.7 million barrels above the 32.5 million target!
More oil means lower prices, not higher.
Second: Libya is not about to play along with any production cuts. And the proof is in the pudding: Libya is exempt from the OPEC deal and their production has surged to the highest in three years. They anticipate production to go from 700,000 bpd currently to 1.2 million barrels this year as they reopen two major oil fields.
Third: Iraq says they are curtailing production, but recent shipping data says otherwise: January loading data of 3.64 million bpd is a fresh record level and tells me that Iraq is looking to capture market share.
Iraqi compliance with the OPEC arrangement is further complicated by previous contract commitments that are likely to come at a higher cost than violating the OPEC arrangement. I expect more shenanigans here.
Fourth: U.S. crude oil production is up 350,000 bpd during the fourth-quarter and U.S. crude oil drilling rig activity is up 24% during that time frame. This points to more supply coming to market in the months ahead and further offsets the OPEC cut.
Again, more oil means lower prices.
Additionally, the U.S. Congress announced this week that it would release 8.0 million barrels of crude oil from the Strategic Petroleum Reserve. The delivery window is slated for March and April and equates to roughly 130,000 bpd.
And it’s not just market fundamentals that have me bearish on oil. My AI models are saying the same thing …
As you can see, oil’s upside run is coming to an end. In fact, it’s going to be absolutely slammed come the second week in February.
And here’s the best part: I know just the way to play it. And so do my members. And it’s not as straightforward as you might think. As with most investing, timing is everything.
So, don’t go it alone. If you haven’t already, check out my Real Wealth Report and other trading services today.