Crude oil prices traded higher yesterday. WTI crude oil began the day at $56.32 and steadily traded higher to its intraday high of $58.59 before closing the day at $58.26.
Inventories Boost Crude Oil Prices
The biggest news for crude oil prices yesterday was the report from the Energy Information Administration (EIA). It showed that crude oil inventories dropped in the week ending on November 29. The report printed a shortage of 4.9 million barrels. The forecast was for a shortage of 1.6 million barrels to follow the surplus of 1.6 million it posted a week before.
This number drive crude oil prices higher because the US is one of the largest consumers of oil. Therefore, the shortage suggests that the country will soon drive up to the demand for the commodity.
OPEC+ Meetings On Deck
Today, there are no more economic reports due for crude oil today. However, it is important to note that OPEC+ (Organization of Petroleum Exporting Countries) are meeting today and tomorrow.
It is widely expected that the organization will announce further reduction to oil production. As it stands, OPEC+ member countries are required to reduce their production by 1.2 million barrels per day until March 2020. There are speculations that by the end of this week, they will announce that they would cut back another 300,000 barrels per day. It is also widely expected that production cuts will extend beyond March of next year. If this is the case, we could see crude oil prices trade even higher because of the prospect of sustained decline in supply.
It is worth mentioning, however, that a few countries have failed to comply with this agreement. Russia has been notably violating this agreement. In fact, there had been earlier talks that Russia may not easily comply to new production cuts.
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Crude Oil Price Outlook
Crude oil prices are currently testing resistance at November highs around $58.44. Tougher production cuts will probably be bullish for the commodity and could send it to the upper band of the rising channel (from connecting the highs and lows since October 3). We will likely see crude oil prices face resistance around $59.70.
On the other hand, if OPEC+ fails to announce additional production cuts, the commodity may trade lower. The near-term support level is around $56.43 where the bottom of the channel seems to coincide. If that level does not hold, the next support is at $54.73 where crude oil prices bottomed in November 2019.Download our latest quarterly market outlook for our longer-term trade ideas.
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