USOil pulled back from Friday’s two-plus year highs of $59.05, trading to $57.80 lows in early N.Y. dealings. Oil market focus has shifted to the November 30 OPEC meeting, where consensus is the group, including non-OPEC producers such as Russia, will agree to extend the current agreement to cap output at about 1.8 mln bpd under production levels seen at the end of 2016. This outcome has been fully priced into current crude prices, and for now, the $60/bbl level looks to be the top of the current rally. Should OPEC not agree to an extension, or delay the decision to the new year, oil prices may swiftly reverse course lower. Recent CFTC CoT reports have revealed very crowded long oil positioning, and we may be seeing some reduction in those positions in the lead-up to Thursday’s meeting. Another rally-killer could come from U.S. shale producers, who have been heavy hedgers at current lofty levels for 2018 and 2019, which will allow them to keep drilling. Note, last week’s Baker-Hughes rig count report showed nine new oil rigs coming back on line.
The $57.80 level was a key daily target and up on the higher time frame USOIL remains well bid ahead of the Vienna meeting with the 20 DMA down at $56.50 and resistance at $59.00. USOil last traded over $60.00 during June 2015.
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