Oil Monthly Forecast – November 2017

Oil bulls enjoyed one of the most profitable months during October as the prices rose by about 10% during the course of the month. We have been talking about the bull run in the oil prices ever since the prices bounced off the $44 region about 3 months back. We were convinced that the OPEC members would do everything in their powers to push up the prices towards their medium term target of $55 and thats why we had been so convinced about this price region even during times of correction.

Oil Prices Move Higher

The move from the lows at $44 has not been very straightforward and have been interspersed with periods of correction but everytime there has been a correction, the oil producers have stepped in with their jawboning and by cutting down of supply as a means of ensuring that the oil prices continue to move up again. Even  during this bullish leg up, the oil producers have ensured that the supply is controlled in such a manner so that the prices manage to reach their targets. It remains to be seen how much higher the oil prices can go in the medium term but for now, the oil bulls should be happy with the way that the prices have been moving.

During the month of October, the prices had stalled and consolidated for about a couple of weeks just short of the $53 region but once the prices broke through the $50 region at the beginning of the month, it was pretty clear that the target of $55 would be achieved quite soon. As mentioned above, there was a lot of selling in the $53 region as the $53 to $55 region had been the region of many range highs before and so it was natural to expect a lot of stops over there which helped to stall the progress for sometime. But all this while, the traders were watching both the supply and demand sides as well as the inventory data from the US as these are the main factors that determine the price of oil.

Oil Prices Stay Buoyant

What we saw during the month of October was a better compliance to the targets that the OPEC members had set for themselves and also for the non-OPEC producers, as far as the production and supply of oil was concerned. This solved a major part of the problem and the only other thing that remained a matter of concern was the inventory. But as the weeks progressed, the inventory data showed a much bigger draw than what was expected and this was enough for the bulls to push the prices through the $53 region and the prices were just short of the $55 region to close the month, with achievement of the $55 target being just a matter of time now.

Looking ahead to the month of November, we are likely to see some consolidation between the $55 and $57 region as the traders begin to take some profits off the table, having reached their first target of $55. After this period of consolidation is done, we expect a push towards the $60 region in the medium term. The fundamentals are going to play a key role here as the dependence of the oil prices on the strength of the dollar has decreased to a great extent in the recent times.

So what is going to matter is the balance between the production, supply and inventory and as long as that is in favor of the bulls, the prices should keep moving up. The OPEC members seem determined to ensure that the agreed production caps are in place and as long as this is in place, we are likely to see the inventory come under pressure which should in turn help to move the prices higher further during the month of November. Of course there would be periods of correction but so far, there have not been any signs of a let up in the bullish run of the oil prices and it is likely to continue to be so in the upcoming month.