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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures moved higher for a fourth session on Friday, putting both markets on track for a weekly gain of about 10%, after Saudi Arabia pressed allies to stick to production quotas and banks including Goldman Sachs predicted a supply deficit.

At 08:52 GMT, December WTI crude oil is trading $41.48, down $0.05 or -0.12% and December Brent crude oil is at $43.82, unchanged.

Both futures contracts are set for their strongest weekly performance since early June after Hurricane Sally cut U.S. production and OPEC and its allies laid out steps to address market weakness.

Lower Gulf of Mexico Production and Another Tropical Storm Brewing

In the Gulf of Mexico, U.S. offshore drillers and exporters began a “clear-up” on Thursday after Hurricane Sally weakened to a depression and started rebooting idle rigs following their closure for five days.

Meanwhile, a tropical depression in the western part of the Gulf of Mexico could become a hurricane in the next few days, potentially threatening more U.S. facilities.

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OPEC+ Leaders Strongly Urge Compliance

The Organization of the Petroleum Exporting Countries (OPEC) and other producers in OPEC+ are currently cutting 7.7 million bpd of output and the group stressed at a meeting on Thursday that it would take action against members not complying with the deal. This news is leading some traders to speculate that OPEC+ will put on hold plans to taper the cut down to 5.8 million bpd…when the entire group convenes again in December.

Additionally, the Saudi Arabian energy minister said those who gamble on oil prices would be hurt “like hell”.

Prince Abdulaziz told the gathering OPEC+ could hold an extraordinary meeting in October if the oil market soured because of weak demand and rising coronavirus cases, according to an OPEC+ source.

“Anyone who thinks they will get a word from me on what we will do next, is absolutely living in a La La Land…I’m going to make sure whoever gambles on this market will be ouching like hell,” Price Abdulaziz told a news conference when asked about OPEC+ next steps.

He said OPEC+ would take a proactive and pre-emptive stance in addressing oil market challenges.

Investment Banks Turn Bullish

Bullish speculators may have jumped on board on Thursday, helping to push prices even higher, after Goldman Sachs predicted the market would be in a deficit of 3 million barrels per day (bpd) by the fourth quarter and reiterated its target for Brent to reach $49 by the end of the year and $65 by the third quarter of 2021.

Meanwhile, Swiss bank UBS also pointed to the possibility of undersupply in the oil market, forecasting Brent would rise to $45 a barrel in the fourth quarter and $55 by mid-2021.

Short-Term Outlook

In spectacular fashion, crude oil traders went from discussing bearish factors such as storage containment issues to celebrating forecasts calling for supply shortages, in less than a week.

Technical factors could play a role in today’s price action with WTI straddling a key retracement level at $41.57. A sustained move over this level could trigger a further rally into the longer-term resistance at $42.41. A trade under $41.51 could create the downside momentum needed to challenge $40.72.

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

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