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Summary: According to sources, OPEC+ will consider further production cuts to support crude oil prices in Thursday's meeting. OPEC+ has reached a preliminary agreement on cutting production by over 1 million barrels per day.

Fundamentals

According to sources, OPEC+ will consider further production cuts to support crude oil prices in Thursday's meeting. After the news broke, international crude oil prices briefly rose over 1%, with the gain now narrowed to 0.75%.

OPEC+ and countries led by Russia, which together account for over 40% of global crude oil production, approximately 43 million barrels per day, have reportedly reached a preliminary agreement on further production cuts exceeding 1 million barrels per day.

As the voluntary production cut plan of 1.3 million barrels per day by Saudi Arabia and Russia will expire at the end of this year, the focus of the meeting is on the 2024 plan. Currently, OPEC+ has reduced production by a total of around 5 million barrels per day.

Two representatives involved in the discussions mentioned that the new round of production cuts could reduce supply in the market by 1 to 2 million barrels per day in the first quarter of next year.

Saudi Arabia has voluntarily reduced production by an additional 1 million barrels per day since July but is reportedly unwilling to bear this additional reduction alone. We could envision a scenario where Russia and Saudi Arabia roll over their cut through the first quarter of 2024 and assemble a coalition of willing individual producers prepared to make voluntary adjustments.

The OPEC meeting, initially scheduled for November 25-26, was postponed to November 30. Sources state that dissatisfaction among African member countries regarding their 2024 production quotas caused the delay, but this issue has been mostly resolved.

The OPEC ministerial-level online meeting is currently ongoing, followed by a broader OPEC+ meeting. It is unclear whether a press conference or a joint statement will follow the meeting. OPEC+ typically does not issue statements, and information from participants regarding joint statements often contradicts each other. As of writing, no recommendations have been put forward. Stay tuned for updates.

On other aspects, due to yesterday's EIA report showing a larger-than-expected increase in inventories, WTI crude oil may remain weak. Inventories increased by 8.7 million barrels, compared to an expected increase of 0.9 million barrels and a previous increase of 3.6 million barrels, indicating significantly weak demand conditions.

The results of PMI preview data related to risk sentiment, to be released by major economies today and tomorrow, may determine the next direction of crude oil prices. Robust improvements across industries may indicate increased consumption of future fuel and energy commodities, potentially translating into an increase in crude oil prices.

On the other hand, weak industry PMI data may make investors nervous about a potential economic downturn, leading to a decline in WTI crude oil prices, as traders anticipate a slowdown in demand conditions.

Technical Analysis

WTI crude oil is currently continuing its downward trend, connecting its lower highs with the descending trendline maintained since October. The price appears poised to retest the resistance level at $79.64.

The Fibonacci retracement tool reveals additional levels that bears might be eyeing. The 38.2% Fibonacci level aligns closely with the major psychological level of $80.00 and the trendline, potentially serving as a deterrent to further upward movement.

If this is the case, crude oil could continue its descent towards the lower end of the range at $72.18 or even lower swing lows. A higher adjustment in the market could reach the 50% Fibonacci level at $81.05 or the 61.8% level at $83.14. On the other hand, breaking these levels could indicate a reversal of the selling pressure.

The stochastic indicator suggests that bulls are in an overbought state or are exhausted, signaling a potential return of selling pressure as it moves lower. The RSI still has more room to rise before reaching the overbought zone, suggesting there might still be some upward momentum. In terms of trading, the focus is on establishing short positions.

Trading Recommendations

Trading Direction: Short

Entry Price: 80.00

Target Price: 73.29

Stop Loss: 82.00

Valid Until: 2023-12-14 23:55:00

Support: 79.67, 78.44, 77.16

Resistance: 80.87, 81.97, 83.38