China relaxing COVID restrictions and OPEC+ announcing additional cuts to output would be game changing moves and could be a major turning point for prices.
The OPEC+ decision would be particularly bullish since it would give traders the confidence to buy dips aggressively in the market on the notion that OPEC+ has their backs.
Later today at 21:30 GMT, the American Petroleum Institute (API) will release its latest weekly inventories figures. It is expected to show a drop of 3 million barrels of crude oil.
Traders will also be monitoring the U.S. Dollar since a weaker greenback tends to support dollar-denominated crude oil.
The OPEC+ decision would be particularly bullish since it would give traders the confidence to buy dips aggressively in the market on the notion that OPEC+ has their backs.
Later today at 21:30 GMT, the American Petroleum Institute (API) will release its latest weekly inventories figures. It is expected to show a drop of 3 million barrels of crude oil.
Traders will also be monitoring the U.S. Dollar since a weaker greenback tends to support dollar-denominated crude oil.
Comment:
The markets are being underpinned by falling U.S. crude inventory figures from the American Petroleum Institute (API), a weaker U.S. Dollar and an improving outlook for China’s demand and economy.
Capping crude oil prices are concerns that OPEC+ would leave output unchanged at its upcoming meeting. Earlier in the week, prices spiked higher on rumors the group would announce another cut in output.
Crude oil traders should pay attention to Powell because his remarks should have an impact on the U.S. Dollar. A hawkish Powell will support the greenback and perhaps put pressure on dollar-denominated crude oil. A less-hawkish Fed could drive down the dollar, leading to increased demand for crude oil.
Capping crude oil prices are concerns that OPEC+ would leave output unchanged at its upcoming meeting. Earlier in the week, prices spiked higher on rumors the group would announce another cut in output.
Crude oil traders should pay attention to Powell because his remarks should have an impact on the U.S. Dollar. A hawkish Powell will support the greenback and perhaps put pressure on dollar-denominated crude oil. A less-hawkish Fed could drive down the dollar, leading to increased demand for crude oil.
Comment:
The early price action suggests uncertainty and impending volatility. Traders seem to be waiting for a catalyst. The next catalyst could be more easing of COVID curbs by China, a surprise output cut from OPEC+ or clarity over the impact of the cap on Russian oil. A steep drop by the U.S. Dollar could also be considered a bullish catalyst.
Comment:
On Wednesday, Fed Chair Powell confirmed that smaller interest rate increases are likely ahead even as he sees progress in the fight against inflation and labor market growth as largely inadequate.
Following the trail set forth by other central bank policymakers earlier in the week and the recent minutes from the last Federal Open Market Committee (FOMC) meeting. Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month. Nonetheless, he did caution that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.
Following the trail set forth by other central bank policymakers earlier in the week and the recent minutes from the last Federal Open Market Committee (FOMC) meeting. Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month. Nonetheless, he did caution that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.
Russian Deputy Prime Minister Alexander Novak, who previously served as Energy Minister, has once again reiterated Russia’s position.
He said that Russia would not supply oil even if the price cap is high because the whole idea of the price cap is unacceptable. Russia’s options include selling oil to countries that have not set the price cap or cutting production.
The second option will be bullish for oil markets, which have been under pressure in recent weeks amid concerns about the slowdown of the world economy and COVID-related problems in China.
At this point, oil traders do not believe that the price cap will have a dramatic impact on Russian oil exports. However, the market’s view may change quickly after December 5.