Oil Fundamental Forecast – December 9, 2016
After three days of lower-lows and two consecutive lower closes, crude oil prices rebounded on Thursday to finish higher for the session. The turnaround was driven by growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production.
January West Texas Intermediate crude oil closed at $50.84, up $1.07 or +2.15%. North Sea Brent crude oil finished at $53.89, up $0.89 or +1.68%.
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Prices fell earlier in the week over doubts about whether the planned production cuts were enough to reduce supply and stabilize prices. OPEC’s plan is to reduce production by 1.2 million barrels per day in the first half of 2017.
Forecast
Oil traders have already moved past the U.S. Energy Information Administration report and are back to watching an OPEC meeting for clues as to the next direction for prices. Oil producers are scheduled to meet in Vienna on Saturday to see if non-OPEC countries will cut production to reduce a global supply glut that has pressured prices for more than two years.
So we are reduced to playing off a 50/50 news event for the second time in three weeks.
Let’s just state the obvious. If the non-OPEC member come in with acceptable numbers then crude is likely to rise. If they disappoint then crude is likely to break. However, I don’t think the deal will collapse. It will just have to be tweak again and again until they get it right.
If calling the trade in crude oil a 50/50 proposition sounds like a cop-out then just take a look at the January WTI crude oil chart and you’ll see that the market has been range bound since April with prices straddling 50% of the 2016 range most of the year.
That’s about as flat and indecisive as a market can get during a calendar year.