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Will OPEC’s Meeting Disappoint Crude Oil Traders?

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Nov. 20 2020, Updated 2:31 p.m. ET

OPEC’s meeting 

OPEC’s meeting will be held on November 30, 2017, in Vienna. On November 27, 2017, OPEC’s working committee stated that the global crude oil market would rebalance by 1H18. As a result, the committee recommended that the ongoing production cuts be extended until December 2018. OPEC members are discussing the options of extending the cuts by three, six, nine, or 12 months.

Oil (BNO) (USO) (UWT) prices have risen ~20% since September 2017 due to speculations about extending the production cuts. Oil (DTO) (UCO) (OIL) futures have priced in the production cut extensions. Reuters and Bloomberg polls suggest that OPEC might extend the output cuts until December 2018.

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Hedge funds cut their bullish bets 

Hedge funds cut their net long positions on US crude oil (USO) (UCO) futures and options ahead of OPEC’s meeting. Similarly, hedge funds have trimmed their net long positions on Brent (BNO) futures and options 2.1% for the week ending November 21, 2017. Hedge funds are cautious ahead of OPEC’s meeting. Any disappointing announcement could pressure oil prices. 

Lower oil prices have a negative impact on energy producers’ (VDE) (XES) earnings like Saudi Aramco, BP (BP), Rosneft, PDC Energy (PDCE), and QEP Resources (QEP).

Impact

Citigroup predicts that OPEC might delay the production cut announcements or extend the production cuts for three or six months. The International Energy Agency thinks that extending the production cuts will only help the oil markets rebalance. Goldman Sachs predicts that oil (USO) (DWT) prices might fall quickly if there’s any disappointing announcement in OPEC’s meeting.

Read Russia and Hedge Funds Could Impact the Crude Oil Market and Risks in the US Natural Gas Market Next Week for the latest news on oil and gas.

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