U.S. West Texas Intermediate and international-benchmark Brent crude oil futures reversed earlier gains and are now trading lower shortly before the U.S. opening. Saudi Arabia’s energy minister triggered the sell-off after he said a cut of 1 million barrels per day would be enough for OPEC and other major exporters.
For about a week, the market has been pricing in the possibility of a 1.3 million barrel reduction in output by OPEC and its allies including Russia. Therefore, today’s news came as a surprise, encouraging bullish investors to dramatically cut long positions. The selling started after Saudi Energy Minister Khalid al-Falih told reporters Thursday morning that a cut of 1 million barrels would be sufficient.
He further added that the Saudi’s are comfortable with the current oil price but confirmed that there had been no decision on an output cut yet. Saudi Arabia is the de facto leader of OPEC so its opinion goes a long way, however, due to the critical nature of this decision, it is likely to wait for Russia’s opinion which may come later in the day.
According to Reuters, five unnamed delegates said ahead of the meeting that the group’s preferred level of supply cuts would effectively be conditional on Moscow’s contribution.
Additionally, Russian Energy Minister Alexander Novak said it would be “much more difficult” for Moscow to cut oil output over the winter because of the cold conditions at Russian oil fields.
Unless there is a bullish clarification from the Saudi oil minister later today, prices are likely to remain under pressure. Bullish comments from Russia could also turn the market around.
Traders will also get the opportunity to react to the latest U.S. Energy Information Administration’s weekly inventories report at 1600 GMT. It is expected to show a 1.3 million barrel decline.
The real question that needs to be answered is how much did the criticism from President Trump of OPEC’s plans to cut output influence Saudi Arabia’s decision to push for a smaller production cut.
This article was originally posted on FX Empire
More From FXEMPIRE:
- What’s the Current Status of Weed Stocks?
- E-mini Dow Jones Industrial Average (YM) Futures Analysis – Plenty of Room to Downside Under 24824
- What Outcome to Expect to from Vienna Today?
- EM Currencies Slip on Renewed Trade Fears
- Trading plan for December 6
- Oil tumbles as markets eye OPEC meeting; Dollar waits for NFP