Crude Oil Retraces Back to the $ 44 Mark – All Eyes on the OPEC Decision!
Arslan Butt • 3 min read
During Wednesday’s Asian trading session, the WTI crude oil prices failed to halt the declining streak of the previous two days, remaining bearish around the $ 44.00 level, due to the surprise build in US crude oil inventories, which eventually fueled fears of oversupply and contributed to the losses in crude. Apart from this, the drop in the crude oil prices could also be associated with the cautious investor sentiment ahead of an OPEC+ meeting to decide whether the OPEC+ organization will continue with the current production cuts of 7.7 million barrels per day, or whether the cuts will be ended.
Besides this, the worries over the intensifying coronavirus situation in the US and Europe keep fueling doubts about economic recovery, which is adding a further burden to the crude oil prices. Furthermore, the long-lasting uncertainty over the Brexit trade talks, and fears of an intensified trade/political war between the West and China, has also hurt the crude oil prices. Conversely, the on-going weakness of the US dollar, triggered by a combination of factors, could also be considered one of the key factors that is helping to probe bearish moves in the crude oil prices, as the price of oil is inversely related to the price of the US dollar. At the moment, crude oil is trading at $ 44.16, and consolidating in the range between 43.92 and 44.38.
As we have already mentioned, the downbeat inventory data, along with OPEC’s decision to postpone a meeting on Monday, thereby delaying any decision over its plans on output cuts for 2021, has been weighing on oil prices. The surprise build in oil inventories in the United States suggests a decline in US oil demand, amid the resurgence of the coronavirus, which has fueled instant fears of oversupply, weighing on the crude oil prices. On the data front, the data released by the American Petroleum Institute showed a 4.146-million-barrel build for the week ending Nov. 27, against the prediction of a 2.272-million-barrel draw. The previous week, we saw a 3.8-million-barrel build.
Apart from this, the losses in the crude oil prices were bolstered by OPEC’s failure to arrive at any production-linked decision during the Joint Ministerial Monitoring Committee (JMMC) on Monday, which created more curiosity among the investors, as to whether OPEC+ will continue with the current production cuts of 7.7 million barrels per day, or put a stop to them. It is worth recalling that the OPEC group imposed output cuts of 7.7 million barrels per day (BPD) earlier this year, as the coronavirus pandemic cut into the fuel demand. It is broadly expected that these reductions will be carried over into January-March 2021, amid spikes in the numbers of COVID-19 cases.
Elsewhere, the fears of rising numbers of coronavirus (COVID-19) cases in the US, Europe and some of the notable Asian nations continue to fuel concerns over global economic recovery, which is putting further pressure on the crude oil prices. As per the latest report, the coronavirus (COVID-19) figures in the US and Europe are getting worse day by day. Meanwhile, the Brexit woes and talks surrounding the tensions between the Dragon Nation and the West are putting an additional burden on crude oil prices.