Oil prices rose today, supported by optimism about the coming OPEC+ meetings and by China’s recent crude processing data.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on the increase:
"Oil prices started the week on a positive note again as traders have many bullish indications to hang onto.
First and foremost we are ahead of the technical briefing that sets the stage for the OPEC+ JTC and JMMC discussions that will follow.
The OPEC+ discussions of this month are not like any other meeting. The oil trading world is expecting, and has likely gambled on, the alliance to scrap plans of boosting its oil production by 2 million bpd from January.
Many OPEC+ officials have indicated that this is a real possibility and that they would agree to such an extension of current output levels if the market situation requires it.
Oil prices have already priced in the belief that OPEC+ will not open the oil taps further and an indication that this may not happen will definitely have a depressing effect on them, if it comes.
For the moment though, prices enjoy gains as all smoke signals point to a roll-over of current targets for 3 or 6 months, as OPEC+ ministers know that anything less will lead to a huge disappointment in the market and sub-40 oil prices very quickly.
Despite the OPEC+ technical meeting being the highlight of the week, there are other data the market is looking at.
China’s crude processing rates in October were reported at a new record-high and the positive market sentiment is supported from the demand side this morning.
Traders put hopes on China to continue to pull the global oil market out of the slump, but China is by far alone not enough to let OPEC+ “off the hook”.
In any case, when one of the world’s biggest oil consumers records an uptick in activity this has to be interpreted as a positive sign and today’s oil pricing also accounts to that element.
Last but not least, not everything is boring after the election in the US. Eyes are still on coming policy from that side of the Atlantic.
The oil market is seeing as positive that Biden’s coronavirus advisers oppose a nationwide lockdown, but rather prefer targeted local measures. This makes a huge difference for oil demand in the country responsible for 20% of global oil demand.
Seeing the bigger picture one thing is clear when we look at how the prices move. The market has put its money on a gamble that OPEC+ will step in and cancel its planned oil production boost.
The odds are that OPEC+ will follow common sense and protect prices, seeing that should it put more oil on the market we are in for a multi-month supply-demand imbalance.
However it’s never sure until it’s done and such deals are never easy to validate with every single member. It will be a nail-biter, as every crucial OPEC+ meeting always is."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/16112020/oil-gains-on-opec-meetings-china-processing-data/