OPEC Meeting: Will They Surprise The Market?
Will Bulls Make A Run On OPEC Meeting?
This is a big week for the oil market.
The Organization of Petroleum Exporting Countries (OPEC) is gathering in Vienna this Friday to discuss output policy for the coming year.
Without question, this OPEC meeting will be highly contentious…
As you’re likely aware, de facto OPEC leader Saudi Arabia sent crude prices into the gutter in 2015 in hopes of retaining global market share. But after a prolonged downturn in prices, some analysts are wondering if the Saudis will abandon their controversial policy.
After all, pressure is building from Iran and other OPEC members to abandon the current plan in favor of production cuts and higher prices.
Will the Saudis reverse course and cut production from their gluttonous 10 million barrels a day?
I doubt it…
You see, even though all of OPEC is suffering with low prices, Saudi Arabia is likely more concerned with soon to be rising Iranian output. Keep in mind, with Iran’s nuclear sanctions on the verge of being lifted, as much as 1 million barrels a day of new oil could hit the global market in 2016.
And that’s not all…
The Saudis have gone on the record many times stating they’ll only cut production if other large non-OPEC countries do the same. That means Russia would have to slash output as well.
Since Russia will be absent from Friday’s meeting, most analysts agree the Saudis will continue their focus on retaining market share.
It’s hard to imagine, but this tenuous situation puts the crude market at risk of sliding to new lows in the coming year.
Here’s a chart…
As you can see, West Texas Intermediate (WTI) crude is just a stone’s throw away from the yearly low near $39 a barrel.
If it were any other week, I’d say the odds favor a technical bounce to higher prices. However, with Friday’s OPEC meeting just around the corner, it’s likely crude stays subdued the next few trading days.
But then sparks will fly…
If OPEC surprises the market and cuts production, you can bet your bottom dollar crude bulls will run wild through the streets.
But as I said earlier, that’s not the most likely outcome.
Instead, OPEC will likely stick to their plan and keep production steady.
Once this is confirmed, there’s a very good chance WTI bears send the commodity careening below the 52-week low near $39 a barrel. Given the current oversupply in the market, bulls will be hard pressed to keep crude from falling below this important line in the sand.
How do you capitalize on this situation?
Crude oil tracking ETFs are one of the most efficient and easy means of trading the crude market.
But if you’re really looking for wild trading action after this Friday’s meeting, look no further than leveraged crude ETFs.
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
