Crude oil prices retreated this week despite the latest industry data reporting a drawdown in inventories for the first time in two months. The Energy Information Administration report this week showed that on the week ending November 30th, US crude oil stockpiles decreased by 7.3 million barrels.
The market is keenly awaiting the outcome of the latest OPEC meeting which is currently in session. The oil cartel began talks today, aimed at agreeing on a reduction in output. Pressure has been mounting as oil prices have been cratering over recent weeks due to the massive oversupply which has swept the market. OPEC has publicly declared its desire to achieve a reduction in output alongside Russia.
The discussions being held in Vienna this week are aimed at achieving a production cut of around 1 million barrels about a day between OPEC and its allies. However, Russia has so far displayed resistance to such calls.
Reportedly, OPEC aims to cut production among its own members by around 650k barrels a day. Following six hours of talks yesterday, the Saudi Arabian energy minister Khalid Al-Falih said that he wasn’t confident that an agreement would be reached.
Al-Falih told reporters:
“Not everybody is ready to cut equally… Russia is not ready for a substantial cut.”
One of the issues facing the group’s objective is that of Iran’s contribution. As Iran is currently under US sanctions and will not agree to a production cut, other nations in the cartel are claiming that they should not have to cut production either. For now, it seems that the market is skeptical of OPEC agreeing on a production cut, reflected in the lower prices seen this week.
Oil prices are currently sitting on the 50.96 level support. Below here, the next key technical level is down at the 40.48 – 42.25 range where there are a raft of previous swing lows offering structural support as well as the completion of a large ABCD symmetry pattern. To the topside, any retest of the broken bullish trend line from 2016 lows is the main resistance.
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