Kuwait Backs the Production Freeze: What Does It Mean?
A production freeze without Iran
On April 5, Kuwait’s governor Nawal Al-Fuzaia indicated that the production freeze deal could be a reality with or without Iran. Earlier this month, Saudi Arabia’s deputy crown prince said in an interview that the production freeze wasn’t possible without Iran. Al-Fuzaia is confident about the success of the deal scheduled on April 17 in Doha.
How will it impact the crude oil market?
On April 6, US (SPY) (IVV) (QQQ) crude oil futures rose 2.8%. The production freeze talk made crude oil volatile since March 14, 2016. Iran said that the oil market wasn’t ready for a production cap at January 2016 levels until the pre-sanction level of 4 million barrels per day of crude output was achieved. The above chart shows how the production freeze comments impacted crude oil prices.
Energy ETFs and stock
The United States Oil (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO)(UWTI) fell 9.1% and 17.90% between March 29 and April 5. Upstream stocks such as Northern Oil & Gas (NOG), Denbury Resources (DNR), and Kosmos Energy (KOS) operate with a high production mix in crude oil. They also take price cues from any volatility in crude oil prices. They operate with crude oil production mixes of 87%, 100%, and 94.9%, respectively.
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