Oil Rebounds After Yesterday’s Pullback

Oil Video 27.11.20.

OPEC+ Starts Discussing Production Cuts Ahead Of Formal Meetings

OPEC+ will discuss the current state of the market and evaluate its next steps during the meetings on November 30 and December 1.

However, Saudi Arabia and Russia decided that the Joint Ministerial Monitoring Committee (JMMC) should also discuss the situation this Saturday, according to a Bloomberg report.

Obviously, JMMC will discuss the extension of current production cuts. The market believes that OPEC+ will extend current cuts for the first three months of 2021.

The physical oil market is under pressure in the near term due to European lockdowns, but traders are eager to buy oil futures in order to bet on robust recovery in 2021.

At this point, it looks like a three-month extension is the maximum extension that OPEC+ producers will be able to negotiate. The budgets of OPEC+ members are stretched due to the double blow from low oil prices and the pandemic, and many countries would like to increase their oil production as soon as possible.

Given the recent vaccine optimism, it should be almost impossible to negotiate a six-month extension even if Saudi Arabia, which seems to be the main proponent of bigger cuts, tries to market such idea.

Oil Continues To Trade Above The $45 Level

Oil failed to settle below the $45 level and is trying to get back to recent highs at $46. Yesterday’s pullback was not continued which indicates that there is significant demand for oil at current levels.

Most likely, oil will remain highly volatile in the upcoming trading sessions. Traders will start to speculate on OPEC+ decision on November 30, while the decision itself may not be clear until the evening of December 1.

In this situation, oil prices will be influenced by general market sentiment and rumors from OPEC+ rather than any fundamental data which may appear over the weekend.

It should be noted that any sustainable rally is impossible without a continued decrease in inventory levels. However, speculative optimism may easily push oil closer to the $50 level if the market is happy with the outcome of the OPEC+ meeting.

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