Crude oil fell slightly yesterday and is trading sideways this morning. Today is D-Day for the commodity given the upcoming OPEC meeting that is due to begin at 9AM GMT. According to Reuters, an OPEC delegate has claimed that another 9-month cut will be made. A second OPEC delegate has made similar claims, remarking that there will be "no surprises". The current agreement to reduce supply by 1.8 million barrels per day will expire in March 2018. Speculators in futures markets have large long crude oil positions that are at risk of unraveling following the event. The previous OPEC announcement earlier this year led to a sharp correction in crude oil. Looking at EIA data, crude stocks fell more than expected helping crude oil prices. On the other hand, both gasoline and distillate inventories were higher than expected. While our outlook remains bullish, the caveat is that prices are at a substantial risk of correcting given excessively bullish sentiment.
WTI is currently trading just above $57.50. Brent crude is currently above $63.80.
Looking at US crude oil stocks, the most recent EIA figures (November 29) showed falling crude oil stocks and rising refined inventories. Crude oil inventories were lower than estimates (-3.4m vs. -3m expected). Gasoline stocks were up (+3.6m vs. +1.4m expected) while distillate stocks (2.7m vs. +0.7m expected) were also up. Looking at reactions in markets, crude oil prices rose following the EIA report.