Oil price poised for first intraweek gain since September on OPEC speculation

on Nov 21, 2014

iNVEZZ.com, Friday, November 21: The price of Brent crude oil futures has retained yesterday’s gains so far in today’s trading session and looked poised to break its worst weekly run on record. The contract soared over two percent during the previous session on growing speculation that the Organization of the Petroleum Exporting Countries (OPEC) will take action to reduce supply at next week’s meeting.
Brent futures for January delivery stood at $79.38 as of 08:01 GMT, up less than 0.1 percent intraday. The contract briefly touched $80 per barrel in earlier trading on the London-based ICE Futures Europe exchange. It jumped $1.74 during the previous session despite weak PMI readings from both China and Europe.
Tim Evans, analyst at Citi Futures, was quoted by the Wall Street Journal as saying that moderate trading volumes however suggested market participants were cautious of making commitments ahead of the OPEC summit on Thursday.

“It’s the countdown to the OPEC meeting,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities, as reported by 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.”
Another key event on next week’s calendar is Monday’s deadline for an agreement between Iran and world leaders over the country’s nuclear program. According to Evans:
“Although the market has been less focused on the Iranian nuclear talks, we should note that a breakthrough in talks that lifts sanctions would add to the wider market sense of oversupply, putting additional pressure on other producers to make room for additional Iranian output”.
Iranian oil minister Bijan Namdar Zanganeh said the country would protect its share of global sales and could double exports in two months if sanctions were removed, according to the ministry’s news website Shana.
The Persian Gulf nation and world powers are seeking to break an impasse by Monday and end an 11-year dispute over its nuclear programme. According to some officials the deadline may be pushed back to March next year.
January WTI futures had gained 22 cents, or 0.29 percent, to $76.07 in electronic trading on the NYMEX in New York as of 08:01 GMT. The contract looked poised to halt its worst losing streak since 1986 on increasing fuel demand as winter approaches, with an early cold wave hitting the US over the past couple of days.
According to Oversea-Chinese Banking Corp Ltd economist Barnabas Gan, the US winter of 2013 saw a 78.5 percent increase in natural gas prices from November to February, and an 8.7 percent increase in crude oil prices from November to December, as reported by the WSJ. He predicts both WTI and Brent crude will regain some lost ground to $80 a barrel and $85 per barrel respectively by the end of the year.
Based on the two front month contracts, Brent was trading at a premium of $3.31 to WTI as of 08:01 GMT, down 8.5 percent from last week’s $3.62 close.

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