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Oil Price Fundamental Daily Forecast – Sentiment Shift Coming with Russia Joining OPEC in Cutting Production

By:
James Hyerczyk
Published: Nov 30, 2018, 04:03 UTC

The reaction by traders to the news about Russia was primarily driven by short-covering, but nonetheless, it is a good sign that the buying may be greater than the selling at current price levels. Furthermore, it also puts the markets in a position to close higher for the week, which would also be a positive development.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher early Friday after posting a potentially bullish technical closing price reversal bottom the previous session. The markets made a rapid reversal on Thursday after industry sources said Russia had accepted the need to cut production, together with OPEC ahead of its meeting in Vienna on December 6.

At 0337 GMT, January WTI crude oil futures are trading $51.69, up $0.23 or +0.45%. January Brent crude oil is at $59.83, up $0.32 or +0.54%.

Coming into Thursday’s session, crude oil was in a position to set one of its biggest one-month declines in November since the worst of the financial crisis in 2008, having dropped about 22 percent so far. Primarily driving the price action this month has been increasing supply by the United States and Saudi Arabia.

After U.S. crude oil fell below $50 for the first time in over a year, the news hit that Russia would consider joining OPEC and other producers to cut output. This triggered the technical reversal in the markets.

Forecast

The reaction by traders to the news about Russia was primarily driven by short-covering, but nonetheless, it is a good sign that the buying may be greater than the selling at current price levels. Furthermore, it also puts the markets in a position to close higher for the week, which would also be a positive development.

The Russian news also seemed to catch investors by surprise because on Wednesday, Russian President Vladimir Putin said he was in touch with OPEC and ready to continue cooperation on supply if needed, but he was satisfied with an oil price of $60.

Sentiment shifted on a report that the Russian Energy Ministry held a meeting with heads of domestic oil producers on Tuesday, before a gathering in Vienna of OPEC and its allies on December 6-7.

“The idea at the meeting was that Russia needs to reduce. The key question is how quickly and by how much,” said one source familiar with the talks between Russian oil firms and the ministry.

Ahead of next week’s OPEC meeting, the market is looking for the cartel and its allies to reduce production by 1 million barrels per day.

WTI and Brent crude oil futures could continue to firm on Friday as long as the possibility of Russia joining OPEC in a plan to cut outlook remains intact. The inability to break the markets further could also fuel additional short-covering.

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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