From MarketWatch (weirdly, do not see referenced story on Wall Street Journal site, hat tip reader Scott):
The Organization of Petroleum Exporting Countries has decided to cut its oil output by 4.2 million barrels a day from September levels, or 2.2 million barrels a day from current output, the Wall Street Journal reported on its Web site Wednesday. Most analysts anticipated a cut of about 2 million barrels a day. On Globex, January crude futures were last down 59 cents, or 1.4%, to $43.03 a barrel
But that isn’t actually what was announced. The cut was 4.2 MBD from September levels. From reader Michael, who listened to the OPEC live feed:
WSJ (of course) screams “4.2mbbl cut” but its sensationalistic as opec minister says that was the cut vs. SEPT production…putting the cut at more like 2.6m. Oil is still red on the news and seems unimpressed. EIA data showed more big builds in diesel and refinery ut. back down at 84%. Bulls will focus on the second derivative of decline is slowing for gasoline demand. In terms of where are they gonna put it…all I can guess is they keep leasing ships and continue shutting production (or dump it??).
In terms of leadership, Hussman had a nice look at it and made the point that low-quality (aka cyclicals…i lump most of materials and energy in with this group) were a massive bubble. In terms of their fate he says:
“In both cases [tech bubble in 2000 and nifty 50 during 70’s], the market declined by about 50 percent and some of the most previously loved stocks fell by greater than 70 percent. Though the market quickly moved higher in 2002 and 1974, this doesn’t provide much of a case that the market will do the same in this instance. Even so, it should be reassuring to long-term investors that they don’t need to chase low-quality stocks or speculative favorites to be successful. Over time, low quality investing tends to be an unrewarding and high-risk round-trip.”
Oil shares seem to be following the WSJ, at least for now…Just do the math on the Bloomberg numbers (which also used the 4.2 MBD headline, but at least did say from September levels):
OPEC agreed to cut oil output by 4.2 million barrels a day from September production levels, Secretary-General Abdalla El-Badri said.
The Organization of Petroleum Exporting Countries will cut output from a daily level of 29.045 million barrels three months ago, indicating a new quota target of 24.845 barrels a day.
A story yesterday on Bloomberg put the November quota at :
In its monthly report today, the OPEC secretariat said production from the 11 members with quotas was 27.937 million barrels a day in November, some 629,000 barrels a day above the official limit. That estimate cited an average of secondary sources, including analysts and new agencies.
Old production quote + 27.308. New target = 24.845. I get a difference of less than 2.5 million MBD.
What kind of press do we have here? And how desperate is OPEC, that they have to resort to Administration-like spinning?
Update 11:30 AM: The Journal has revised its initial report:
The Organization of Petroleum Exporting Countries announced Wednesday that it will cut its oil production by a further 2.2 million barrels a day.
The new cut is effective from January 2009 Iraq’s oil minister said, and brings OPEC’s total announced supply reductions to 4.2 million barrels a day since August.