Countdown To OPEC Dec 4th Meeting

Markets are recovering from Tuesday’s panic reaction to the situation in Turkey, oil prices as slowly giving back gains. It seems that a diplomatic solution and a war of words will help move past the situation. Fortunately there was no loss of life as the pilots ejected safely.  Turkey shot down the Russian jet near the Syrian border on Tuesday, saying the plane had violated its air space, in one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century. Oil prices surged higher on Tuesday after Turkey shot down a Russian warplane on the Syrian border, sparking concerns about rising in the oil-rich Middle East. West Texas Intermediate gained $1.12 to $42.87 a barrel on the New York Mercantile Exchange. Brent oil advanced $1.29 to $46.12 a barrel in London.

Market analysts noted that Syria produces almost no oil and that there was a good chance that the uptick in tensions over the incident could abate before long. As a result, some viewed Tuesday’s jump in oil prices as evidence of profit taking. The market is looking ahead to today’s US oil inventory report. Analysts said the impending Thanksgiving holiday in the US on Thursday could mute reaction to the government report, although there also was the chance of greater volatility due to low trading volume.

This morning in the Asian session oil prices continued to rally as crude oil gained 23 cents to 42.88 and Brent oil added 12 cents to 46.22. Oil is slowly giving back gains as the day progresses as diplomacy seems to be the current option to ease the situation. Traders are setting their sights on a meeting on December 4 of the Organisation of the Petroleum Exporting Countries for signs on whether the cartel will slash high production levels which have depressed prices in an oversupplied market.

With oil prices under pressure since mid-2014 amid concerns about oversupply, the market was focused on recent remarks by Saudi Arabia, the top producer in the OPEC cartel, that it was ready to work with other producers to stabilize oil prices. OPEC’s decision a year ago to maintain output despite falling prices accelerated the collapse in prices and is believed to represent the cartel’s bid to safeguard market share. Still, Saudi Oil Minister Ali al-Naimi called for efforts to stabilize the energy market last week, saying that Saudi Arabia was prepared to work with OPEC and non-OPEC producers to support prices. Ahead of the OPEC meeting, it’s a positive sign that the Saudis are talking this up right now.