Crude Oil flattens as OPEC+ decision on production normalization looms

• Oil prices are broadly flat on the day, retreating further away from $70, as traders brace for OPEC+ decision on supply cuts.
• OPEC+ needs to overdeliver on market expectations in order to prevent Oil prices from dropping further. 
• The US Dollar Index remains stuck in a tight range ahead of Friday’s US Nonfarm payrolls release. 

Crude Oil is consolidating at around $68.50 on Thursday after Wednesday’s losses ahead of the decision from OPEC+ meeting that is taking place at the time of writing. OPEC+ members are convening online to discuss a delay of the production normalization amidst sluggish demand and oversupply coming from non-OPEC+ countries.  Market expectations are for at least a delay of three months, so OPEC+ will need to overdeliver in order to get that promised floor in Oil prices. 

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is softening in very calm markets as the dust settles on the French political uncertainty after its government fell on Wednesday. Traders are sitting on their hands ahead of Friday’s Nonfarm Payrolls release, the last one of the year. Overnight, Fed Chairman Jerome Powell kept his cards close to his chest on the odds for a December rate cut, while commenting that the US debt is becoming unsustainable and needs to be addressed. 

At the time of writing, Crude Oil (WTI) trades at $68.50 and Brent Crude at $72.30.

Oil news and market movers: OPEC+ talk of the town

• Reuters reports that the OPEC+ meeting is expected to begin at 11:00 GMT. 
• The overnight Crude stockpile change numbers from the Energy Information Administration (EIA) were completely different from the numbers seen earlier this week from the American Petroleum Institute (API). Whereas the API saw a surprise build of 1.232 million barrels, the EIA number came in as a surprise drawdown of 5.073 million barrels. 
• OPEC+ is likely to extend their oil output cuts – originally scheduled to start in January – by at least three months, Reuters said in a Thursday report, citing OPEC+ sources.

Oil Technical Analysis: Are expectations too high?

Crude Oil price might be undergoing a gruesome disappointment if OPEC+ is unable to overdeliver on market expectations. With several analysts penciling in a delay between three to six months, OPEC+ is forced to at least deliver a 6 months production normalization delay. Preferably even longer, with anything less than 6 months set to push Oil prices further down ahead of President-elect Donald Trump’s presidency. 

With the leg lower this week, the 55-day Simple Moving Average (SMA) at $70.17 triggered a firm rejection on Wednesday. Should the OPEC+ communication be able to initiate a spike, look for $71.46 with the 100-day SMA at $71.65 as thick resistance. In case Oil traders can plough through that level, $75.27 is up next on the topside as pivotal level. 

On the other side, traders see  $67.12 – a level that held the price in May and June 2023 – rapidly nearing. In case that breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023 will quickly be tested for more downside.

US WTI Crude Oil: Daily Chart