The IEA releases its monthly Oil Market Report for non-subscribers about two weeks after the initial release on October 11…Here are two charts showing OPEC and non-OPEC supply:
The IEA and others expect demand in the 2nd half of 2017 to balance the market even without an OPEC agreement… Should the November meeting fall apart, how far will prices fall is question for oil traders, especially oil options traders… If I am confident that, say, $40 is still a good price floor even with a bad result (with supply/demand balance looming), I might look at selling $40 into the meeting… I’m not recommending this (selling puts was a disastrous trade after the November 2014 meeting fell apart), but we may see a muted price response to the downside after this meeting… And, we are still over a month away, much can happen in the world of energy markets…
Speaking of options… December options expire before the November OPEC meeting, so any purchasing of price protection needs to occur in January options… We already see Jan options settling at around 2 vol points over December… This is unusual… Front month implied vol is normally higher than the second month…
Here is the link to the IEA report: https://www.iea.org/oilmarketreport/omrpublic/currentreport/#Overview
Leave a Reply