OPEC Meeting Preview: What to Expect of Oil?
Oil benchmarks on both sides of Atlantic fluctuated between gains and losses this Thursday, unable to find a clear direction, as oil markets closely monitor developments surrounding today’s OPEC ministers meet in Vienna. Currently, both crude benchmarks are seen wavering, with Brent modestly flat at$ 49.69, while WTI oil drops -0.30% to $ 48.86.
Markets have almost priced-in that there will be no agreement between OPEC members over freezing crude production, mainly due to the strong rivalry between Saudi Arabia and Iran. However, reports did emerge on Wednesday that some oil producing states would discuss output cut/freeze.
However, oil traders are not ruling out surprises, as a couple of changes in the leadership amongst the OPEC members, offers some ray of light for the oil prices, which started to recover from $ 26 mark since the beginning of this year.
Research Team at BBH noted, "The basis for surprise is that Saudi Arabia has a new oil minister. Khalid Al-Faliah takes over the reins from Al-Naimi, who held the post for two decades. Al-Faliah may not pursue a conciliatory tone. Saudi Arabia cannot cede market share to Iran. However, the armed with higher oil prices, and some sign that its strategy is paying off, Al-Faliah may make his presence felt. This could be done, for example, by proposing to reinstate a cap on OPEC output. It is not quite the same thing as a freeze, but it is a step toward re-establishing order.."
"In addition to the Saudi's new oil minister, OPEC may (finally) agree on a new Secretary General. El-Badri formally headed OPEC for the past nine years. His term was extended due to lack of agreement on his successor. Hence agreeing on a new Secretary-General would also be a step toward re-establishing OPEC's credentials."
At the Doha meeting in April, no agreement was reached between the OPEC and non-OPEC producers on output freeze plans, as Saudi Arabia insisted Iran to join in the global output freeze efforts. However, Iran is unlikely to curb its production, especially after the Western sanctions were lifted on the crude exports.
WTI Technical Levels
Ross J Burland, Analyst at FXStreet explained, “To the downside, the 20 dma at 47.68 has supported the price in April and May previously and technicals remain bullish until a break below 1st May lows of $44.52 and $43.30 2nd May low. $42.51 and the 200 dma at $40.31 ahead of $39 are further key supporting levels.”