Bakken Update: The Saudi Big Short Squeeze -- Filloon -- December 2, 2016

Over at SeekingAlpha. Summary:

• Since the OPEC Algiers meeting in September, it has been manipulating oil prices to its advantage
• The OPEC cut isn't the issue as it caused oil prices to increase so operators would hedge then pushed prices down to create a larger move after its cut
• There is no organization to provide oversight to OPEC and even if there was the world feels comfortable with OPEC moves to manipulate prices
• The new Saudi Petroleum Minister has changed how it looks at oil prices and will continue to do anything with in its means to inflate prices 

From the article:

OPEC despises market manipulations with a negative effect on prices.

Oil hedging helped to keep the frac'ers in business when oil prices pulled back. This was part of the reason OPEC was wrong about the effectiveness of flooding the market. It believes the US effects oil prices in a negatively. It blames unconventional US production for today's low prices. Some of this is true, and there is no doubt it has a point, but OPEC has a motive for punishing the US oil industry.

In September, OPEC agreed in principle at a meeting in Algiers to reduce output for the first time since the 2008 financial crisis. Although the details were not released, it was strung out until December. This is important, because the initial announcement pushed oil prices to $52. US E&Ps added significant hedges as seen earlier. We didn't know there was a deal until Wednesday's Vienna meeting. The time between release provided an excellent opportunity for OPEC. The release of negative statements pushed oil prices lower. Iran, Iraq and Saudi Arabia all participated. We may include Russia as well.

It pushed oil prices down below $43/bbl as short positions were added. This provided an excellent opportunity for a short squeeze, and rhetoric was used until the last minute. It is possible the details weren't worked out until Wednesday, but it would seem the Saudi Big Short Squeeze was initiated to create an exaggerated move to the upside.

If accomplished, oil prices could climb and hold above current hedges of US operators. If so, OPEC may have a new mandate. The production cut in concert with a Trump presidency, might continue to move the markets higher. The short squeeze continues, and institutional dollars will begin to roll into energy names over the last two weeks of this month.