Oil prices higher ahead of central bank, OPEC meetings
London (Nov 30) Crude oil prices gained ground Monday, ahead of a raft of economic data and meetings this week, with traders watching if the Organization of the Petroleum Exporting Countries will adjust its production policy to stabilize prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January CLF6, +0.36% rose 38 cents, or 0.9%, to $42.08 a barrel. January Brent crude LCOF6, +0.62% on London’s ICE Futures exchange turned higher, rising 53 cents, or 1.2%, to $45.39 a barrel.
But prices for both grades have fallen nearly 10% in November and many analysts are predicting a “lower for longer” scenario in the face global oversupply amid softening demand.
Oil prices have been sliding for over a year since the Organization of the Petroleum Exporting Countries opted to keep production high to protect market share and bump out rivals in the U.S. and those outside the cartel.
Some analysts say the tactic has resulted in some U.S. shale producers temporarily shutting off their taps, but the consistently low prices have also stoked frustration among oil producers and companies which have had to trim investments and delay projects in recent months.
So far, the general view is that OPEC will maintain the “no-cut” policy. Any changes would be likely determined until after the effect of Iranian oil returning to the market become more apparent in coming months, analysts say.
“Saudi Arabia’s position so far has been to hold production steady in the face of declining prices. We don’t see this changing, despite some recent rhetoric that OPEC’s de facto leader, Saudi Arabia, was working to stabilize prices,” ANZ Research said in a report.
Traders will also be taking cues from various central banks from around the world this week. Expectations are high that the European Central Bank President Mario Draghi will announce a round of fresh measures this Thursday to boost the economy.
“The ECB is expected to at least cut its deposit interest rate by another 10 basis points,” said OCBC.
In the U.S., Federal Reserve Chairman Janet Yellen will be giving her outlook on the U.S. economy Thursday. The monthly nonfarm payroll will also be released on Friday. Analysts will be combing through both events for hints on the future direction of the U.S. interest rates and the strength of the greenback.
“We may expect some bearishness [on oil prices] from possible increases to the U.S. dollar strength. However, we would think that fundamentals will play the bigger role,” said Phillip Futures analyst Daniel Ang.
The weekly U.S. crude inventories and production data is due from the Energy Information Administration on Wednesday.
In Asia, on Tuesday, China will release its official November manufacturing purchasing manager’s index which could see a decline for the fourth straight month, underscoring the deceleration in the world’s second biggest economy.
Nymex reformulated gasoline blendstock for December RBF6, -0.27% — the benchmark gasoline contract — rose 1 cent, or 0.6%, to $1.399 a gallon.