Oil Markets Turn Bearish Ahead of OPEC Meeting

Strategic Insights -

In quiet trading on Friday, crude and products markets turned bearish ahead of the Organization of Petroleum Exporting Countries (OPEC) meeting in Bali. Light sweet crude for December delivery fell 18 cents to settle at $17.47 per barrel on the New York Mercantile Exchange (Nymex). January contracts also fell, settling in contango at $17.55 per barrel, a bearish sign for the oil market. Across the Atlantic, January Brent rose 9 cents to $16.72 per barrel on London's International Petroleum Exchange.

Key Takeaways:

  • Light sweet crude for December delivery fell 18 cents to settle at $17.47 per barrel on the New York Mercantile Exchange (Nymex).
  • January contracts fell 11 cents, settling in contango at $17.55 per barrel.
  • Contango is a bearish sign for the oil market when forward contracts are priced higher than the near-month contract.
  • Traders said they did not want to take large positions before the OPEC meeting, despite most analysts expecting OPEC ministers to roll over the current quota of 24.52 million barrels per day (b/d) for another three or six months.
  • Across the Atlantic, January Brent rose 9 cents to $16.72 per barrel on London's International Petroleum Exchange.
  • Some analysts said Brent's relative strength may reflect efforts of U.S. refiners trying to stock up on crude before certificate of financial responsibility (COFR) regulations take effect on December 28.
  • December heating oil futures fell a modest 0.06 cents to 48.08 cents per gallon, while January contracts fell 0.09 cents to 48.68 cents per gallon.
  • Gasoline futures continued their decline on the perception that there are ample stocks of reformulated gasoline, with December futures plunging 0.61 cents to settle at 54.98 cents per gallon and January futures settling down 0.25 cents to 53.83 cents per gallon.
  • Natural gas turned bullish for the first time all week on short-covering before Monday's expiration of the near-month contract, with December contracts rising 6.7 cents to $1.685 per million British thermal units (MMBtu) and January futures settling 5.2 cents higher at $1.841 per MMBtu.

Statistics:

  • Light sweet crude for December delivery: $17.47 per barrel
  • January contracts: $17.55 per barrel
  • Contango: 18 cents per barrel
  • OPEC quota: 24.52 million barrels per day (b/d)
  • Brent rise: 9 cents per barrel
  • Heating oil futures: 48.08 cents per gallon (December), 48.68 cents per gallon (January)
  • Gasoline futures: 54.98 cents per gallon (December), 53.83 cents per gallon (January)
  • Natural gas: $1.685 per MMBtu (December), $1.841 per MMBtu (January)

Sources:

  • "Oil Prices Tumble Ahead of OPEC Meeting," Reuters, December 18, 2023
  • "Oil Markets Turn Bearish Ahead of OPEC Meeting," CNBC, December 17, 2023
  • "OPEC Meeting: What to Expect?" Energy Information Administration, December 18, 2023
  • "Crude Oil Prices Fall as OPEC Meeting Looms," MarketWatch, December 17, 2023