Crude oil trading outlook: futures steady before uncertain outcome of OPEC meeting

Both West Texas Intermediate and Brent were little changed on Tuesday amid OPEC disagreements on production cuts and speculations of a possible countries exemption from the reductions.

January US crude was unchanged for the day at $75.78 per barrel at 08:42 GMT. Prices held in a daily range of $75.95-$75.47 a barrel. The contract lost 0.95% on Monday to $75.78 and is currently trading 26% lower from its June peak.

Meanwhile on the ICE, Brent for delivery in the same month fell 0.34% to $79.41 a barrel, having shifted in a daily range between $79.66 and $79.11. The European crude benchmark dropped 0.85% on Monday to $79.68, settling at a premium of $3.90 to WTI. The gap narrowed to $3.63 on Tuesday.

Thursdays OPEC meeting in Vienna will see ministers debate over whether their countries should reduce per-day oil production. However, different interests may stand in the way of reaching an agreement, smaller producers want to cut production to push prices up, while big exporters are aiming to preserve their market share against rising producers outside the oil club.

The Organization of the Petroleum Exporting Countries may be considering to exclude Iraq, Iran ad Libya from the possible cuts, two individuals with knowledge of the matter said.

“It makes sense that these three countries shouldn’t have to make further cuts” because they are already pumping less than they’re able to, Abhishek Deshpande, oil markets analyst at Natixis, said in a phone interview for Bloomberg.

Ali Al-Naimi, Saudi Arabia’s oil minister, said that this is not the first time when oil markets are oversupplied and he doesnt expect a difficult meeting.

However, Societe Generale said: “The next OPEC meeting on 27 November could be ugly, argumentative, and drawn out.”

Ecuador, Venezuela, Libya and Iran have asked the twelve-member group to cut production, while Kuwait and others have said that reductions are unlikely. Saudi Arabias decision will be of utmost importance as the groups biggest producer and exporter has been related to speculations that the country is involved in a global oil price war and is likely to vote against lowering production rates.

“Saudi Arabias response so far to falling oil prices is an acknowledgment that it is less able to influence oil prices than at any time over the past decade” said Barclays Bank.

Even if an agreement is reached, some analysts say that production cut of 500 000 barrels per day would not be sufficient to support prices. Nicolas Robin, a commodities fund manager at Threadneedle, projected that a reduction of between 1 million and 1.5 million bpd would be enough to push prices above $85.

Investors also eyed key economic data from the US to assess demand prospects in the worlds No1 consumer following modest economic growth in Germany in the third quarter.

The Bureau of Economic Analysis is expected to revise down its Q3 GDP annualized growth estimate to a hefty 3.3% from the initial 3.5% reading..

Meanwhile, the Conference Board will likely report that US consumer confidence surged in November to the highest since before the beginning of the 2008 crisis, with the corresponding index expected to come in at 95.9 compared to 94.5 in October.

Although better-than-expected figures would strengthen the US dollar and thus pressure commodity prices, they would also support oil on the demand side, providing a stable floor.

Pivot Points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $76.08. In case the contract breaches the first resistance level at $76.72, it may rise to $77.65. Should the second key resistance be broken, the US benchmark may attempt to advance $78.29.

If the contract manages to breach the first key support $75.15, it might come to test $74.51. With this second key support broken, movement to the downside could continue to $73.58.

Meanwhile, January Brent’s central pivot point is projected at $79.98. The contract will see its first resistance level at $80.55. If breached, it may rise and test $81.43. In case the second key resistance is broken, the European crude benchmark may attempt to advance $82.00.

If Brent manages to penetrate the first key support at $79.10, it could continue down to test $78.53. With the second support broken, downside movement may extend to $77.65 per barrel.