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Will Russia and OPEC Help Crude Oil Bears?


Nov. 20 2020, Updated 12:13 p.m. ET

Crude oil prices  

December US crude oil (UWT) (DWT) (OIL) futures contracts rose 0.11% to $55.39 per barrel in electronic trading at 1:20 AM EST on November 16, 2017. Likewise, December E-Mini S&P 500 (SPY) futures contracts rose 0.26% to 2,571.5 during the same time.

US crude oil prices are at a ten-day low. Lower oil prices have a negative impact on energy producers (XES) (VDE) like BP (BP), Stone Energy (SGY), ConocoPhillips (COP), and Denbury Resources (DNR).

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OPEC meeting 

OPEC’s bi-annual meeting will be held on November 30, 2017. In previous meetings, OPEC and Russia decided to cut the oil output by 1,800,000 barrels per day from January 2017 to March 2018. The production cuts tightened global supplies and supported oil prices. Oil (BNO) (UCO) prices have risen ~30% since the lows in June 2017 partially due to ongoing productions cuts.

Some traders expect that production cuts might be extended for nine or 12 months. On November 2, 2017, the Russian energy minister said that it was too early to declare extending the production cuts. Russia’s oil major Rosneft stated that any exit or expiry of the ongoing productions cuts could cause oil prices to crash. Citigroup predicts that OPEC might extend the deal for three more months or postpone making a decision until January 2018. OPEC’s secretary general stated that OPEC is looking for a consensus on how long to extend the production cut deal.

Any announcement of an extension could support oil prices. However, if the production cut deal isn’t extended, prices could feel the heat. After the deal expires, Russia, Libya, and Iran could ramp up production and weigh on oil prices.

Next, we’ll analyze how US crude oil inventories impact oil prices.


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