18.11.202011:25 Forex Analysis & Reviews: Oil market traded in a lull as no significant movements were recorded

Oil prices remain practically unchanged Wednesday morning with no visible movements noted. However, the fluctuations that did occur are extremely weak and multidirectional. The reason for the respite and caution of investors was the decision of OPEC to postpone the increase in oil production, which was supposed to happen in January next year. The organization took two weeks to finalize their decision on this issue. If the increase in production is not delayed, it will grow by 2 million barrels per day from the beginning of next year. Meanwhile, most analysts believe that without a reduction in production, the recovery of the oil market in the near future is simply impossible, since the main pressure is on demand, which is limited by the excess of existing supply.

Following the results of the OPEC meeting on Tuesday, member states did not rush to make such categorical decisions and paused for reflection and analysis of the current situation. Over the next two weeks, it is planned to conduct a thorough analysis of the supply and demand of raw materials on the market, as well as consider all other possible scenarios according to the data that is already available. The next OPEC meeting is scheduled for December 1, 2020, and documents with the main conclusions on the existing problems and all possible solutions will be prepared for it.

Market participants expressed great hope that the ministers of the organization will still make a positive decision on reducing oil production since this is now one of the most accessible and effective mechanisms for stabilizing the situation. Thus, the existing production level of 7.7 million barrels per day is expected to continue for at least another three months. During this time, it will be possible to track positive trends and gain a foothold in them. Moreover, investors and experts expect the most decisive action from the organization.

If the issue of reducing production remains unresolved and its previous level remains, this will be another negative factor for the market, which may again seriously sink against the background of the heating situation. At the very least, investors are very hopeful that the reduction will still happen in 2021, as the crisis in the oil industry is growing rapidly.

Along with the torment of OPEC, data on the level of crude oil reserves in the US, which is traditionally presented by the American Petroleum Institute (API) on the eve of the release of official statistics, also became significant for the market. According to preliminary estimates, the country's reserves of raw materials for the past week, ended November 13, should increase by about 4.2 million barrels. The level of gasoline reserves is also expected to rise by 256,000 barrels, while distillates, on the contrary, will decrease by 5 million barrels.

On the other hand, experts surveyed by S&P Global Platts say that the level of crude oil reserves will be 100,000 barrels less, gasoline will increase by 300,000 barrels, and distillates will sink by 1.8 million barrels.

Rather ambiguous forecasts caused confusion in the circles of traders, which forced the oil commodity to almost completely stop its movement in anticipation of official statistics, which should be released very soon.

The price of futures contracts for Brent crude oil for delivery in January on the trading floor in London slightly decreased by 0.09% or $0.04, which sent it to $43.71 per barrel. Tuesday's trading ended on a negative note with a reduction of 0.2% or $0.07, leaving the price at $43.75 per barrel.

The price of futures contracts for WTI crude oil for delivery in December on the electronic trading platform in New York also fell on Wednesday by 0.31% or $0.13. This sent the current price level at $41.3 per barrel. Tuesday's trading was more successful for the brand, as it ended with an increase of 0.2% or $0.09, which sent the price at $41.43 per barrel.