- Chinese numbers better over the weekend
- OPEC meeting this week
- Iraqi oil minister hints at deepening oil cuts
One of the most closely followed markets in the upcoming week will be the crude oil markets as they have been bouncing around in a very well-defined range. With the US/China situation continuing to cause headaches for traders around the world, oil now has to worry about the OPEC meeting later this week.
Chinese economic figures
Oil futures did start off the week a bit higher, rising over $1.00 in the WTI and Brent grades as the Caixin Manufacturing PMI rose to 51.8 in November, gaining from 51.7 the previous month. This shows signs that perhaps China is starting to bottom out as far as the downturn is concerned.
signs that perhaps China is starting to bottom out as far as the downturn is concerned
That seems likely to be one of the main drivers of where crude oil will go over the longer term, as much of the world’s demand comes out of that country, along with the transportation of its goods too.
OPEC meeting
The week features an OPEC meeting in Vienna, which could give a major heads-up to where the crude oil markets will go next. There are hints that OPEC may extend production cuts further. If that’s the case, it will keep supply slightly tighter, although the Americans are pumping out 12 million barrels a day. That being said, if OPEC does extend its production cuts, it should be supportive for pricing.
The Iraqi oil minister over the weekend suggested that OPEC and its allies would even consider deepening production cuts by 400,000 barrels a day to 1.6 million barrels. This will change the expectations that recently had been just for a simple continuation. If that is the case, it’s likely that the price of oil will go up, although only temporarily, as OPEC countries have a long history of cheating when it comes to production cuts.
Trading going forward
Trading over this next several handful of sessions will be interesting in the crude oil markets, because it will be based purely upon headline factors. After all, the market in the West Texas Intermediate grade of crude oil have been stuck between $50 on the bottom and $60 on the top. If there is indeed a significant cut, it could send markets above that massive resistance barrier. However, with the recent comments, OPEC is set up for disappointment as well.
Anything less than an extension of production cuts as well as an additional cut of something close to 400,000 barrels a day will disappoint the market and more than likely send oil prices lower.
Beyond that, the US/China trade situation will continue to remain a huge determining factor. As that drags on, the demand for crude oil will continue to wilt. More than likely, OPEC will have the ability to provide a short-term jewel to the market but longer-term, there are major structural issues well beyond OPEC’s control.
