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What to Expect from Crude Oil Futures in November

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Crude oil futures 

December US crude oil (DWT) (UCO) futures contracts fell 0.25% and were trading at $56.62 per barrel in electronic trading at 1:22 AM EST on November 14, 2017. Similarly, December 2017 E-Mini S&P 500 (SPY) futures fell 0.14% to 2,578.75 in electronic trading.

Brent and US oil futures are near a 30-month high. High oil prices benefit energy producers (XOP) (IEZ) like ConocoPhillips (COP), EOG Resources (EOG), and Whiting Petroleum (WLL).

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OPEC’s meeting 

OPEC’s bi-annual meeting will be on November 30, 2017. Traders expect that ongoing production cuts could be extended for nine or 12 more months. If OPEC extends the production cuts, it would drive oil (BNO) (DBO) (SCO) prices higher.

Hedge funds and production cuts

Hedge funds’ net long positions on Brent crude oil futures and options rose 2.4% to a record 543,069 contracts for the week ending November 7, 2017, according to ICE Futures Europe. Traders think that ongoing production cuts, tension in the Middle East, and supply disruptions in Libya, Nigeria, and Venezuela could drive oil prices higher. Hedge funds’ net long positions on US crude oil futures are at the highest level since March 2017.

Impact 

The production cuts have helped reduce global supplies and decreased US and global crude oil inventories. Crude oil prices (USL) (UWT) have risen more than ~30% since the lows in June 2017 due to supply outages, productions cuts, and improved global crude oil demand.

Longer-than-expected production cuts could have a positive impact on oil prices. However, any delay in the extension of the output cuts could pressure oil prices. Citigroup thinks that OPEC might delay the decision about extending the production cuts until January 2018.

In the next part, we’ll discuss US crude oil inventories and OPEC’s monthly report.

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