The GERM Report

-The OPEC+ marriage goes on.

-We’re still riffing on Bob Dudley’s quote from 2015.

Crude oil prices had a rather volatile day on Thursday as traders waited around for OPEC+ to make up its mind on what to do next. After a meeting concluded to add barrels to the market starting in January, the price direction moved upward. More barrels would not usually lead to an increase in crude oil prices, though we suspect the fact that the meeting didn’t end in a messy divorce was reason enough for market optimism. Chevron cuttings its exploratory budget may also be supportive for the session.

Crude oil prices were flat to slightly negative to start the day, but rallied mid-day after early news on the OPEC+ deal was confirmed. (We got clued in around 6 a.m. ET). The price for Brent crude oil was up 1.2% as of 2:57 p.m. ET to trade at $48.82 per barrel.

We had the Emirati minister sitting alone on the video conference for the OPEC+ meeting, seemingly unaware of the late start. Iranian Oil Minister Bijan Zanganeh left the conference briefly. But as far as we know, that’s about as tumultuous as it got in Vienna. No divorce. No punch ups. Just another OPEC meeting preceded by the usual nail-biting. Saudi Arabia is still in charge. No, the UAE didn’t win. And nobody really lost.

Herding two dozen or so cats into a corral is no easy feat. Imagine asking that many runners, all with a varying degree of fitness, to run around the block hand-in-hand. They’d probably not get very far, and likely take a tumble or two in the process. That’s OPEC+. What we got was an agreement to allow another 500,000 barrels per day on the market starting in January, take it from there and, if needed, throw no more than 500,000 bpd out there after that. Bar-napkin math tells us that’s essentially nothing. “A drop in the ocean” one of our colleagues told us. But then again — and think about this when watching the market reaction — if it were Libya alone putting that much on the water every month, crude oil prices would be in the tank.

And if you thought the juicy gossip leading up to this meeting was fun. Just wait. We get to do it every month starting in January as OPEC and non-OPEC ministers meet to decide on further adjustments. That is not a recipe for market stability given the propensity for gossip.

In other perhaps supportive news, Chevron on Thursday announced further belt-tightening measures to survive. The company outlined an exploratory budget through 2024 of around $15 billion, far less than its earlier forecast of $22 billion. The company said it was planning on spending about half what it planned to next year in the Permian basin. Speaking to Reuters, Biraj Borkhataria at RBC Capital Markets gave us a new Dudleyism by saying this was a reflection of “lower for longer capex.”