Monday morning seems like an age ago when markets got their first opportunity to react to a failed attempt between OPEC members and Russia to agree a global production freeze to boost oil prices. The Doha/Qatar meet was a joke. However, rather than selling-off hard at the prospect of a continued global supply glut, prices have in fact remained remarkably firm, even managing to post fresh 2016 recovery highs this week. This suggests reluctance by those who have bought into the rally to cash out. It also implies no resumption of the aggressive short-selling that sent the price of a barrel to 18-month lows in January. Both these facts are bullish. In fact, having delivered gains of over 5% this week, it can be assumed that we have witnessed additional buying interest for the commodity in spite of the strong 70% bounce from January’s 12/13 year lows.

So what do oil markets have to hang their hats on in the near term? Well there is no official oil producer meeting scheduled until OPEC’s semi-annual June jolly in Vienna. However, there is already talk of another Doha-like meeting, this time in Moscow, in May. Does this suggest Russia getting more serious about engineering some sort of pact? The effects of a lower oil price, prior sanctions and currency moves are known to be biting hard. There are plenty of smaller OPEC nations in a similar boat, creating OPEC divides, as oil-reliant government coffers run dry.

Could Saudi Arabia deliver another crafty move next time, getting everyone excited about an agreement before picking up the ball and going home, saying it won’t play without regional rival Iran on-board? It’s strange because Riyadh has just as much at stake too, chipping away at its cash pile while it sells its oil for less all the while refusing to cut production in order to maintain market share for when the oil price recovers. That’s if it ever does. We believe the more nimble US shale/frackers have become the de-facto swing producers thanks to Saudi stubbornness, now able to start/stop when the oil price rises and falls. And they suggest prices above $40/barrel are where it is worthwhile, which is pretty much where we are training.

Now this may mean prices are unlikely to return to the $100/barrel level that allowed all and sundry to party like it was 1999. It is also unlikely that any of the players involved will allow prices to drop back to the painful lows we saw in January. This is good news in terms of range-trading, with potential for any weakness to be pounced on by the bulls and any strength to be sold into by the bears. And we are sure to have plenty more market moving commentary from oil ministers from Angola to Saudi Arabia and Nigeria to Russia about global supply and potential meetings to help prices move around. A market made just for you. We comment on things like this day in and day out. If you’d like to more about similar trading opportunities you need to be receiving our highly respected research. Sign up here for free and enjoy fresh ideas daily.

Mike van Dulken, Head of Research, 22 April