During the day on Sunday, the Iraqi oil minister, Jabar al-Luabi suggested that the oil and natural gas producers in the country need to increase output next year. This of course flies in the face of the OPEC nations trying to implement an agreement to cut back on production for the first time since the 2008 financial crisis. Oil prices have been far too low for many of the nations in the OPEC block, and as a result the oversupply has been extraordinarily detrimental to many of those economies.
Currently, OPEC is producing somewhere near 33.6 million barrels per day. Iraq produces 4.43 million barrels per day, making it a significant force in the OPEC situation. After all, the recent output cut that has been suggested is only for 750,000 barrels a day, and at this point in time the markets are oversupplied by more than 2 million barrels per day. In other words, this cutback was always going to fall short of what is actually needed, and if the Iraqi output starts to pick up yet again, this of course will put bearish pressure on the oil markets themselves.
His statement suggested that Iraq is looking to increase gas output by 350 to 450,000,000 ft.³ a day. This of course would be bearish for natural gas longer-term, which much like oil has been very strong lately. At this point in time, it appears that the Iraqis will be the first in the oil producing nations to take their self-interest at heart, meaning that as the country needs more financial help, they will produce more oil even if it means selling at a lower price.
With all of the bearish pressure that we have seen in both the WTI Crude Oil and the Natural Gas markets, this could be the beginning of enough “bad news” to start turning things back around. We at The Trader Guy have suggested that we still don’t like the energy markets, because of a multitude of reasons. This just adds yet another reason to be suspicious. With this, we are still looking for selling opportunities for longer-term moves. Currently, we feel that even if you are bullish – the market is overbought.