Oil turned higher in volatile trading Tuesday, with continued skepticism over OPEC’s plan to curb output hampering price gains for crude futures as the U.S. votes for its next president.
December West Texas Intermediate crude CLZ6, +0.07% edged up by 22 cents, or 0.5%, to $45.11 a barrel on the New York Mercantile Exchange, after tapping a low at $44.41. Prices gained 1.9% on Monday after posting declines for six sessions in a row. January Brent crude on London’s ICE Futures exchange LCOJ7, +0.00% added 14 cents, or 0.3%, to $46.29 a barrel.
“I continue to expect OPEC speculation and technical support and resistance levels to drive the direction of oil regardless of who is the victor in the presidential race,” said Troy Vincent, oil analyst at ClipperData.
For now, the market continues to doubt that the Organization of the Petroleum Exporting Countries will complete an agreement to curtail production, but the skepticism isn’t enough to pull prices drastically lower, he said.
OPEC agreed in late September to target production of 32.5 million to 33 million barrels a day, but said it wouldn’t complete a deal until the Nov. 30 meeting in Vienna. S&P Global Platts late last week reported that the cartel’s oil production rose to a record 33.54 million barrels a day in October.
It remains to be seen if non-OPEC Russia, the world’s biggest energy producer, would join the accord. Some media are reporting that OPEC Secretary-General Mohammed Barkindo said Russia will be “on board” and is expected to throw its weight behind the deal.
But one of the possible major hurdles hampering an agreement is the longstanding tension between Saudi Arabia and Iran. Iran has argued that it deserves to be exempt from any production-curb deal because it was subject to sanctions until January.
“The Middle East mistrust between Saudi and Iran threatens to sink any agreement after the Saudis allegedly told Iran, ‘sign or we turn the taps up higher,’“ said Stuart Ive, a client manager at OM Financial.
Vincent said $44 for WTI oil is a “key technical support level, a break of which would lead to a reversal” to $40. “Market participants just don’t have the conviction to move drastically in either direction at this time, which is why prices have traded in a tight range since bouncing from $44 on Friday.”
Meanwhile, financial markets were keeping a close watch on the election as voters headed to the polls Tuesday.
“The market has largely priced in a Clinton victory so if she wins, we would see marginal effects on oil prices,” said Vyanne Lai, an analyst at National Australia Bank, adding most market participants are banking on Clinton to embrace an open-trade policy that could help improve the global flow of oil and gas trades.
However, if Trump pulls a surprise upset, global markets, including equities and commodities, could see sharp gyration, she added.
Oil investors will also be watching the weekly U.S. oil inventories and production data for week ended Nov. 4. In the previous week, U.S. inventories rose to a three-decade high of more than 14 million barrels, largely due to imports. The official data from the Energy Information Administration will be out on Wednesday. The American Petroleum Institute’s data will be released later Tuesday.
Analysts polled by S&P Global Platts forecast a rise of 1.6 million barrels in crude stockpiles.
December natural gas NGZ16, -5.79% dropped 15.1 cents, or 5.5%, to $2.662 per million British thermal units. Part of the day’s drop appears to stem from a recent U.S. government forecast revision, “which now sees normal temperatures over the short-term rather than previously anticipated colder weather in key regions,” said Robbie Fraser, commodity analyst at Schneider Electric.
Separately, Platts reported late Monday that China’s apparent oil demand in September fell by 2.4% from the same time a year ago to 10.85 million barrels a day.
Data from China, meanwhile, showed that the nation’s October crude imports rose 9.3% on-year to 28.79 million barrels, the second lowest volume of the year as many refiners underwent maintenance last month. China is one of the world’s biggest energy consumers and often rivals the U.S. as the top energy importer.