A nervous crude oil market awaits OPEC’s next move

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  Crude oil prices remain under pressure with the latest weakness being triggered by OPEC’s decision to delay the meeting originally planned for this weekend until November 30, potentially pointing to a discord within the group about production levels, quotas and compliance, and with that reduced expectations the group will be able to intervene and arrest the latest slide.


Weekly COT update: Crude selling slows; grains in demand

Key points

  • Crude oil trades lower after OPEC+ was forced to delay its upcoming amid a brewing discord
  • A repeat of the 2020 price war between Russia and Saudi Arabia seems extremely unlikely
  • Brent resistance at $82.40, the 200-day MA with $74, the 200-week MA providing solid support
 

Crude oil prices remain under pressure with the latest weakness being triggered by OPEC’s decision to delay the meeting originally planned for this weekend until November 30, potentially pointing to a discord within the group about production levels, quotas and compliance, and with that reduced expectations the group will be able to intervene and arrest the latest slide from above $90 in Brent to a recent low below $80. Saudi Arabia, having led from the front and cut production by more than 1.5 million barrels a day in 2023 will most certainly want a higher degree of compliance and potential more in terms of cuts from other members who have increased production while enjoying the higher prices achieved due to Saudi restraint.
 

The biggest concern but also highly unlikely development from a price stability perspective is the risk of Saudi Arabia dialling back its unilateral production cuts, a development that given the current demand softness and rising non-OPEC production would bring back memories of what happened to oil prices during pandemic hit H1-2020, when Russia refused to join Saudi-led efforts to stem the price through production cuts. Saudi Arabia started a temporary and very ill-timed price war with Russia that saw its production jump 1.6 mb/d while Brent crude slumped below $20 a barrel. Fast forward and Saudi Arabia are once facing lower prices and little help from its 'friends' to curb production at a time where non-OPEC supply in the coming two years look set to outpace growth in global demand, thereby forcing restraint from OPEC in order to protect prices. 

While the temperature ahead of the meeting has been raised significantly, none of the producers will risk a public discord potentially sending prices even lower, and with that in mind we expect an agreement will be reached, mostly focusing on compliance to quotas and accountability on reported baseline capacity. While Saudi Arabia is likely to extend its current unilateral production cuts until the end of Q2 next year, they are most likely not willing to make any additional cuts, so much will depend on the behaviour of members like Iran who have been flooding the market with oil from increased production and from storage, and Russia who have struggled to deliver their promised cut. The UAE is potential another point of contention given their plans to raise production next year at the expense of African producers, Angola and Nigeria, who have been forced to accept lower quotas after not reaching their levels for many months. 

According to the latest COT (Commitment Of Traders) data from the CFTC (Commodity Futures Trading Commission) and ICE Exchange Europe covering the week to November 14, Brent and WTI crude oil futures have seen almost uninterrupted selling from hedge funds since the net long hit a near two-year peak on September 19. Since then, the combined long has slumped by 44% to a four-month low at 295k contracts, potentially leaving the market increasingly exposed to news that triggers a rebound.
Following the November 7 slump, Brent crude oil has struggled to break back above the 200-day moving average, last at $82.36, while buyers have continued to emerge below $80 with the 200-week moving average, currently at $74 being the major defence line which has provided support on several occasions during the first half. Source: Saxo

Quarterly Outlook 2024 Q4

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Head of FX Strategy

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Head of FX Strategy

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.