Crude Oil Waiting on OPEC

Kate Leaman
Kate Leaman

29 November 2019

Last update: 2 December 2019
3 min read

Oil trading

  • Crude oil markets pull back on Friday
  • Still showing gains for the week
  • Awaiting OPEC Plus in Vienna
  • Remain range-bound

Crude oil markets pulled back a little during the trading session on Friday, but they have been in a huge range for some time. One should keep in mind that the volume over Thanskgiving week has been relatively light, especially over the last couple of sessions. That being said, it’s very likely that Monday will bring in more as we start to focus on the meeting in Vienna.

perhaps things will continue to progress on the China-US front. It could drive up demand for crude oil

Beyond that, we have the China-US trade talks going on, and there is a creeping optimism about that situation. That’s because even though Donald Trump just signed the so-called Hong Kong Bill, which expressed the US’s support for Hong Kong protesters, the Chinese complained but have yet to retaliate.

That is a sign that perhaps things will continue to progress on the China-US front. It could drive up demand for crude oil, or at least that’s the thought process.

The meeting in Vienna

The meeting in Vienna by OPEC Plus will take place on December 5 and 6 and will be closely watched by traders around the world. This features all of the OPEC members and some of its closest compatriots, including Russia.

There is a certain amount of thought that this meeting should produce some type of continuation of the overall production cuts, and therefore put a little bit of a floor in the commodity.

If they were to not extend the production cuts that are already in place, this would be very negative for crude oil. That’s likely to cause major issues for the market, and it’s because of it that a production cut extension is almost a given. After all, the market has been struggling to break out to the upside even with this production cut. Of course, the increased output of crude oil by the United States has not helped the situation either.

That being said, expect a lot of algorithmic trading relatively soon. Headlines coming out of that meeting will be parsed by machines, perhaps sending the market in one direction suddenly.

Alternately, we could simply see OPEC sit on its hands beyond expanding production cuts. That means the market will then shift its focus from OPEC to the China-US trade situation almost exclusively.

Outlook for next month

One should expect a lot of choppy and sideways trading between now and the meeting, so it’s advisable to keep within the relatively reliable range that’s between $50 on the bottom and $60. It is very unlikely that the market will break out of this range in the meantime, but the meeting could cause things to happen.

If they do not choose to extend the production cuts, oil will almost certainly test the $50 level for a potential breakdown. On the other hand, if the production cuts are not extended, oil could test the $60 level above. The same can be said if the United States and China come together on a trade deal, as it should drive up demand for petroleum.

Kate Leaman
Written By
Kate Leaman

With over 10 years experience as a trade news writer, Kate is our FX and commodities expert. Kate is also a talented voice over artist and BBC TV presenter, mother of two and yoga fan. Read Kate's bio

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