Oil Price Fundamental Daily Forecast – New Concerns Over Russia’s Participation in Output Cut Extension
U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Thursday as expectations that OPEC would extend production cuts were offset by the impact of rising U.S. crude production and inventories.
January WTI crude oil settled at $55.35, down $0.17 or -0.31% and February Brent crude oil closed at $61.29, down $0.47 or -0.76%.
Oil prices have been under pressure since November 8 when they were trading at a 2-year high. Sellers began to take control after signs that U.S. supply is rising fast and could potentially undermine OPEC’s efforts to tighten the market.
Forecast
Crude oil futures are trading mixed early Friday with WTI posting a small gain and Brent trading lower. Both markets are poised to post their first weekly loss in six weeks. Traders are saying the mixed results are in reaction to pressure from surging U.S. supplies and doubts over Russian support for continuing a cut in crude output. Strong U.S. crude exports are also boosting WTI futures.
U.S. investment bank Jefferies raised the issue about Russia’s participation in the OPEC-led deal to trim production. They are saying “Russian support for a formalized extension of production cuts at the November 30 OPEC meeting appears questionable, even if only to defer the decision to 1Q18.
This is potentially bearish for crude oil especially Brent. The almost 40-percent gain in Brent prices since June has been driven by speculation that OPEC and the other non-OPEC producers including Russia would agree to an extension of their current output cuts beyond the March 2018 deadline.
OPEC will meet on November 30 to discuss this matter.
OPEC has set a goal of driving oil stockpiles below the five-year average and it is not likely to reach this goal next year without the extension.
Despite the three day consolidation, I think there is enough downside momentum to drive January WTI crude oil into its value zone at $54.62 to $53.78 and February Brent into $60.36 to $59.40.
This article was originally posted on FX Empire
