Oil Prices Quiet Ahead of OPEC Meeting that Could Lead to Production Cut

Oil prices were traded under pressure on the back of the strong U.S. dollar and the prospect of production cut that will be decided and announced next week, on Wednesday. During the last trading sessions and especially tomorrow the oil prices were traded subdued as traders are reluctant to take big positions in the uncertainty that is currently dominating the oil market. Yesterday’s thin volatility due to Thanksgiving day was one more reason for the oil price to close near its opening levels for the day.

The Organization of the Petroleum Exporting Countries (OPEC) isdue to meet on November 30 in Vienna, potentially together with the non-OPEC member Russia, to coordinate output cut. There is disagreement within the producer cartel, thus, the question is which country members should cut output and how much. Though, one cut may not be enough to shore up a market with oil oversupply for more than two years.

The last five years, the oil output increased massively and since 2013, the production of oil surpasses the consumption and this oversupply is forecasted to continue at least until the end of the next year, if actions not taken, according to the U.S. Energy Information Administration.

It should be noted that a strong dollar which oil is traded, makes fuel more expensive for countries with different currencies, potentially limiting or even decreasing demand. Thus, is dollar’s rising momentum keeps strong, a small oil output cut may not be enough due to a potential decrease in demand.

WTI Crude Oil – Technical Outlook

The West Texas Intermediate (WTI) is recording the fourth negative day in a row following the significant rebound on the $49.30 resistance level. The crude oil failed to surpass above the latter level and currently is developing near the $47.60 price level, slightly below the 200-SMA on the 4-hour chart. The price is moving towards the $47.10 support level which overlaps with the 50-SMA or moreover until the $44.90, however, it needs to go through the 100-SMA.

Technical indicators are endorsing the bearish attitude on price as both are falling. The RSI indicator is pointing downwards and has just entered the negative territory. The MACD oscillator is weakening and lies below its trigger and zero lines.