And OPEC’s once-waining influence is back in full force. They’ve cut oil production quotas by 2 million barrels per day… And Biden is furious. Oil prices were finally returning to “acceptable” levels, with gasoline prices leveling out, as well. Now, a return to $100 per barrel (or more) is almost certain. It turns out, the American taxpayer doesn’t have much say when it comes to global oil markets, OilPrice reports.

It’s a decision that has received a lot of pushback, as it could have tremendous financial repercussions that will be felt in every corner of the globe for years to come. The next moves in the oil market could be the difference between recession and relief… And this time around, all eyes are on Big Oil. They’re holding all of the cards… And betting on the right companies could pay off in a big way.

The OPEC+ cut is a disaster for president Biden.The OPEC+ decision to cut its production quota by 2 million bpd has placed the Biden Administration between a rock and a hard place, with oil prices climbing ahead of the mid-terms and very few viable options to counter. Any doubt about the cohesion of OPEC+ was put to bed this week as the group’s summit in Vienna ended with a 2 million bpd production cut. This cut appears to have achieved exactly what the participating members wanted, namely higher oil prices. It appears that fears of a global economic slowdown have taken a back seat to oil market fundamentals and geopolitical uncertainty. 

Saudi Arabia, the country that will spearhead the production cuts (Russia is already producing at its decreased target), has put the Biden Administration between a rock and a hard place only several weeks before the midterm elections. Confronted with the prospect of rising gasoline prices, the White House needs to react swiftly if it does not want to be seen as weak. 

White house mulls antitrust case against OPEC+. On the back of the OPEC+ 2 million bpd production cut, the Biden Administration threatened to trigger anti-trust action against the alliance, with legal committees in both chambers of Congress approving legislation that would allow the White House to do so. “The geopolitics of energy is back with full fury,” said Dan Yergin, vice chairman of IHS Markit.

OPEC+ cut draws hedge funds back into the oil market. Portfolio investors were encouraged to return to the oil market early last week by the prospect of production cuts by OPEC and its allies, which offset some bearishness induced by the prospect of an imminent recession, John Kemp reports.
Hedge funds and other money managers purchased the equivalent of 62 million barrels in the six most important petroleum futures and options contracts in the week ending Oct. 4., according to regulators’ records. Fund buying concentrated on crude (+46 million barrels) rather than fuels (+15 million) and came ahead of a decision by OPEC+ on Oct. 5 to cut the group’s combined output allocations by 2 million barrels per day. 

Portfolio managers purchased Brent (+27 million barrels), NYMEX and ICE WTI (+19 million), European gas oil (+6 million), U.S. diesel (+6 million) and U.S. gasoline (+4 million). Buying was concentrated in the contracts which had seen the heaviest sales since the summer amid expectations that petroleum consumption will be hit by an impending recession. As a result, the combined crude position climbed to 360 million barrels (18th percentile for all weeks since 2013) up from 314 million barrels (10th percentile) the previous week.

/OilPrice, Reuters/