WTI Hangs on JMMC and China Data

Crude prices could be jolted later in the week as the OPEC meeting is open to changes in production cuts, and the Chinese Manufacturing PMI is expected to miss returning to expansion.

To Cut or to Negotiate?

There have been conflicting reports about the already controversial upcoming Joint Ministerial Monitoring Committee (JMMC) and broader OPEC+ meeting. Initially, it was scheduled for last weekend, but apparent disagreement on cuts pushed the gathering forward until Thursday. Oil prices fell in response to the delay amidst reports that at least two members - Angola and Nigeria - wanted to increase their quotas.

That's significant because Nigeria has become the second largest producer in the cartel, but an increase in production while Saudi Arabia is voluntarily curtailing production doesn't necessarily mean a total increase in OPEC supply. It might mean tense negotiations among other OPEC member countries, who reduce production to accommodate Algeria's and Nigeria's demands. This needs to be taken into context with reports that OPEC+ is looking to cut supply even further. Those rumours come as Brent prices dipped below $80/bbl recently, down from the around $98/bbl seen at the end of September.

And on the Demand Side

There had been controversy in OPEC in the summer, with nations demanding higher production quotas, such as the UAE. At the time, crude prices were approaching $70/bbl, and the tensions in the middle of the oil production cartel seemed to ease as the price of crude rose on expected increased demand followed by the war between Israel and Hamas. Now that Middle East tensions are easing, crude prices have come down. The initial prospect of higher demand after the US saw Q3 GDP jump has been tempered by forecasts of slowing growth in the world's number one oil consumer.

Attention then turns to the world's largest crude importer, China, which has experienced a rough economic patch so far this year. But there does seem to be hope that industrial production in China might be picking up, which could mean further demand for crude. Only recently, China blessed additional import quotas of 3M metric tons to private refiners as independent refiners seek alternative sources to boost processing. The Asian giant will provide a snapshot of its economic situation with November PMIs, starting with the official NBS measure on Thursday, which is expected to just barely miss returning to expansion at 49.9, up from 49.5 in October. The private Caixin measure is expected to experience a similar move, rising to 49.8 from 49.5 prior. A minimal beat on either measure could be psychologically important, as popping over 50 signals expansion could bring back hopes that China will increase its crude demand over the winter.

WTI in Consolidation

The crude oil price is in a consolidation mode, with chances of seeing a range or triangle increasing while trading between $77 and $72.5 a barrel (triangles typically break towards the trend: down). If the top gives way to bulls, breaking $81.30 might open the door to $85 next. Conversely, sliding under the regional support will expose the round support at $70 and the next swing low at $67.

Source: SpreadEx/ LIGHT CRUDE

Key Takeaways

The upcoming OPEC meeting and Chinese Manufacturing PMI are expected to impact crude prices. There is uncertainty about production cuts and reports of disagreements among OPEC members. While Nigeria's desire to increase production could lead to tense negotiations, there are also rumours of further supply cuts. On the demand side, China's economic situation is being closely watched, with hopes that industrial production will increase.