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Oil Retreats Ahead of OPEC's Meeting, Market Activily Low on Holiday

Nov, 24th 18:02

Crude oil prices were slightly lower on Thursday. Even though U.S. crude supplies were reported to U.S. crude oil stocks drop last week, investors remained in cautiousness ahead of next week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) to finalize its proposed cap on production reached earlier this September.

Due to the U.S. Thanksgiving holiday, market activity was low on Thursday. Furthermore, traders were reluctant to take on big price bets amid uncertainties over the outcome of OPEC’s meeting which is scheduled on November 30th.

Energy Minister Alexander Novak stated earlier today that Russia could revise down its 2017 oil production plans by 200,000-300,000 barrels per day (bpd) if a global output freeze comes into force. As reported to be stated by Azerbaijan Energy Minister Natig Aliyev, OPEC will probably propose that other producers cut production by 880,000 bpd for six months starting from next year.

However, according to an OPEC source, OPEC has yet to make a final proposal to non-OPEC countries on joint production cuts, which will not be discussed until Nov. 28 in Vienna.

It remains uncertain whether an output-cut deal could be enough to balance a market that has already been dogged by a glut for more than 2 years. Fatih Birol, Director of the International Energy Agency, said that even if production is cut, higher prices could prompt U.S. shale oil drillers to massively increase their own output.

A weekly report by the U.S. Energy Information Administration on Wednesday showed that U.S. crude oil stocks fell last week after three straight weeks of builds. Crude oil inventories dropped 1.3 million barrels in the week ending November 18 as imports declined while refineries hiked output.

brent

Fig: BRENT D1 Technical Chart

Brent crude has retreated for a third consecutive session after reaching the highest level since October 31 on Monday. The price action failed to breach the long term DMA50 and is heading downwards to the support at 23.6% level. Stochastic lines have escaped from the overbought zone and is pointing down, suggesting further declines.

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