Borja Rubio is a Bachelor in Business Management & Administration by the Complutense University of Madrid. He is an expert in Management of Securities with Derivative Products by the BME (Spanish Stock Exchange). He holds a SIBE operator’s license and a MEEF operator’s license. He is also an Analyst at XTB Spain.
There was a sharp increase (around 9 percent) in WTI crude oil during the last two sessions, bouncing from monthly lows of $42 per barrel, a rise by almost $4, in a very short period of time. As we stated in past weeks, any rumor, news or leak regarding OPEC and non-OPEC producers’ stockpiles in November (key for the future of crude in the coming months) will be questioned by investors, causing increased volatility both upwards and downwards.
Since mid-October (annual highs), sales on the futures market spiked and this once again steered it towards a more skeptical environment, with doubts on whether the agreement reached in September will be enforced and output reduction will actually occur in the coming months. This is why the latest rebound occurred boosted by supposed discussions prior to setting the agreement.
What is left for the rest of the month is mostly uncertainty, with the crucial culmination on the November 30 meeting in Vienna (OPEC official meeting). We have often commented that price stabilization was and continues to be a common goal for major producers, since basically any price below $40 represents a significant hit to their commercial balances and widens the deficit of heavily oil-dependent counties.
It seems the last hurdle, after the pre-agreement with Iran, is that countries like Libya, Nigeria, and Iraq are granted a deal, since due to their situations these countries have asked for exemptions regarding the production cut, and in case of a breach, there is always Saudi Arabia’s threat of going back to the price wars, in which this country would increase supply. Ultimately, the most likely scenario would be an agreement with “nuances”, a price estimation at around $40-$60 for the next months.