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Oil Price Fundamental Daily Forecast – Expect OPEC+ Counter-Punch to Offset SPR Releases

By:
James Hyerczyk
Published: Nov 23, 2021, 13:12 UTC

Don’t expect OPEC+ to sit back and watch the U.S. and its allies wipe out some of the gains that the group has worked diligently to achieve.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Tuesday on worries over rising supply expectations and lower demand due to COVID-19 breakouts in Europe. The markets are also trading inside yesterday’s range which suggests investor indecision and impending volatility.

At 12:03 GMT, January WTI crude oil is trading $75.71, down $1.04 or -1.36% and January Brent crude oil is at $78.70, down $1.00 or -1.25%.

Traders Bracing for US Emergency Oil Release Plan

The United States is expected to announce a loan of crude oil from its emergency stockpile on Tuesday as part of a plan it hashed out with major Asian energy consumers to lower energy prices, a Biden administration source familiar with the situation said, and Reuters reported.

A so-called “swap” from the U.S. Strategic Petroleum Reserve (SPR) will be announced on Tuesday in a move coordinated with several countries, the source said. The source did not specify how much oil would be released from the stockpiles.

Biden has already asked China, India, South Korea and Japan to release strategic oil stocks in concert with the United States. Japanese and Indian officials are working on ways to do that, Reuters reported.

The unprecedented effort by Washington to team up with major Asian economies to lower energy prices is intended as a warning to major producers that they should pump more oil to address concerns of high fuel prices in powerhouse economies.

OPEC+ Could Announce Counter-Punch

Don’t expect OPEC and its allies to sit back and watch the U.S. and its allies wipe out some of the gains that OPEC+ has worked diligently to achieve over the past year.

After rebuffing repeated requests from Washington to pump more oil, the group is not expected to allow other countries to fuel an oversupply situation and could announce downward adjustments to its planned increases when it meets on December 2.

Short-Term Outlook

Crude oil traders should be bracing for heightened volatility over the near-term because of a number of uncertainties.

Firstly, no one knows how big the releases from Strategic Petroleum Reserves will be. It’s possible that the market has priced in too high of a number. In this case, prices could rebound. If the amount comes in higher than expected, then look for further downside pressure.

Secondly, no one knows how OPEC+ will respond when it meets on December 2. The group could leave the planned 400,000 barrel per day output increase unchanged. Or it could vote to reduce the production hike, thereby releasing less oil than currently priced in.

Thirdly, new COVID-19 cases could spread throughout Europe, further reducing demand. If demand drops substantially at the same time the oil from the Strategic Petroleum Reserves is being released then we could have an oil glut on our hands, which would be bearish for prices.

That being said, I believe OPEC+ will counter-punch will a cut in expected production hikes.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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