Hints & Rumors From Saudi’s Keep Oil Speculators Unsure

This week will be an exciting week for commodities with eurozone stimulus and the US rate increase controlling the value of the US dollar which weighs heavily on the price of oil. On Tuesday evening the American Petroleum Institute will release its estimates of stocks and Wednesday the official EIA inventory will be released, these events are expected to be overshadowed by the annual OPEC meeting on December 4^th. Comments and headlines will be flowing from OPEC members and governments over the next few days and oil speculators are expected to respond to these while playing little attention to the fundamentals. Crude oil gained 30 cents in the Asian session on Tuesday to trade at 41.95 while Brent oil added 23 cents to 44.78.

China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers add to risks facing the government’s growth target. Declining manufacturing reduces China’s oil usage. Premier Li Keqiang’s goal of about 7 percent expansion for 2015 is at risk, even as employment has held up thanks to resilience the in services and consumption.

Oil prices traded below $42 in Asia today ahead of an OPEC meeting and the release of data on China’s important manufacturing sector later in the week. The market will be watching whether members of the Organisation of the Petroleum Exporting Countries, which meets on December 4, slash the currently high output levels and ease a crude supply glut that has depressed prices for more than a year. Analysts said traders will also tune in to two key speeches by US Federal Reserve chair Janet Yellen this week for signs on the timing of a hike in US interest rates.

OPEC’s Friday meeting is expected to focus on the global crude oversupply, the return of Iranian oil to the market after the lifting of western economic sanctions and whether the cartel will cut production to boost prices.

“However, comments from key OPEC ministers still seem relatively sanguine. Also, it is not clear that even if OPEC did cut its production target, actual output would fall, given the cartel is already producing well above its current target,” Capital Economics said.

Over the last year, crude prices in the US have lost 36.95% due to an oversupply plaguing the global crude market. The onus of the supply glut has been placed on the shale boom in the US, and the timid demand for the commodity as European, Chinese, and other economies struggle. It was one year ago this week that OPEC and the Saudi’s launched their program against US shale producers.

A Wall Street Journal report from earlier today suggested that Saudi Arabia—the largest crude oil producer among the 12 member-nations and in the world—would be pressured to reduce production rates. In earlier meetings, Saudi Arabia has opposed lowering production rates, in an effort to defend its 40% market share against US shale producers, among other non-OPEC crude oil producing nations.