Crude oil trading outlook: futures rise on OPEC speculations, US data

Both West Texas Intermediate and Brent crude rose on Friday as investors remained ambivalent about their expectations for the outcome of OPECs meeting in Vienna next week. Market players also eyed diplomatic developments between Iran and major world powers, while upbeat US data lent support.

January US crude rose 0.45% to $76.19 per barrel by 08:22 GMT. Prices held in a daily range of $76.80-$76.01 a barrel. The contract rose 1.81% on Thursday to $75.85, the most in a week.

Meanwhile on the ICE, Brent for delivery in the same month rose 0.19% to $79.48 a barrel, having shifted in a daily range between $80.00, the highest since November 13th, and $79.33. The European crude benchmark gained 1.57% on Thursday to $79.33, settling at a premium of $3.48 to WTI. The gap narrowed to $3.29 on Friday.

Growing division between investors expectations about the outcome of OPECs gathering next week gave the market a boost. Venezuela reaffirmed its commitment to cut output, should the Organization of the Petroleum Exporting Countries decide to reduce its collective production, Foreign Minister Rafael Ramirez said.

However, while Libya, Ecuador and Venezuela have been calling for an output cut to safeguard oil prices, leading producer Saudi Arabia and Kuwait have shown unwillingness to pump less and lose market share at a time of continuously rising US shale production, which is already running at record high.

Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said for Bloomberg: “There are certainly differing views within the group – those that want cuts and those that don’t. Saudi Arabia will try and protect its market share through discounted sales; there’s a price war.”

According to a Bloomberg survey of analysts, half of the polled participants expect no change in the groups production policy, while the rest project a reduction. Bank of America said that Saudi Arabia may prefer lower and volatile prices to force US shale producers out of the market.

“I think it will be very difficult for OPEC to agree a cut and announce a headline number,” said for CNBC Victor Shum, managing director of downstream energy consulting with IHS.

Bank of America forecast that the oil cartel may trim its collective production pace by no more than 500 000 bpd. However, many analysts also speculate that even if a production cut is voted, some members may not ensure compliance.

Economic data

The oil market was subjected to a slew of key economic data on Thursday. Manufacturing activity growth in China fell to the lowest in six months in November, according to a preliminary gauge, while business growth in the Eurozone stalled to a 16-month low.

Support, however, was drawn by better-than-expected economic figures from the US. Existing home sales rose by 1.5% in October to an annualized pace of 5.26 million, beating projections for a drop to 5.15 million from Septembers upward-revised 5.18 million. This was the highest reading since September 2013.

Meanwhile, the Philadelphia Fed Manufacturing Index surged to 40.8 in November, the highest since March 2011, vastly exceeding expectations for a drop to 18.5 from 20.7 in October.

The Energy Information Administration reported on Wednesday that US crude oil supplies rose by 2.608 million barrels to 381.1 million in the seven days ended November 14th, exceeding projections, while domestic crude output was at 9.004 million barrels per day, compared to 9.063 million bpd a week earlier, which was the largest on record for weekly data.

Market players also eyed diplomatic developments between Iran and major world powers seeking to reach an accord on curbing the Islamic Republics nuclear program in exchange for lifting tough economic sanctions. However, officials have said that significant gaps remain between the two sides and a previously set November 24 deadline might be extended to March.

Oil Minister Bijan Namdar Zanganeh said that Iran will protect its market share and can double its oil exports within two months, if sanctions are lifted.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $75.47. In case the contract breaches the first resistance level at $76.75, it may rise to $77.64. Should the second key resistance be broken, the US benchmark may attempt to advance $78.92.

If the contract manages to breach the first key support $74.58, it might come to test $73.30. With this second key support broken, movement to the downside could continue to $72.41.

Meanwhile, January Brent’s central pivot point is projected at $78.95. The contract will see its first resistance level at $80.33. If breached, it may rise and test $81.34. In case the second key resistance is broken, the European crude benchmark may attempt to advance $82.72.

If Brent manages to penetrate the first key support at $77.94, it could continue down to test $76.56. With the second support broken, downside movement may extend to $75.55 per barrel.