The crude oil futures price is attempting to pair losses (both WTI and Brent), it dropped yesterday after official inventory reports indicated a larger-than-expected build in U.S. oil stocks (actual 5.3m versus forecasts at 0.4m).
European ICE Brent crude futures dropped to $45.623 per barrel, currently trading $45.932 levels. OPEC members are due to meet on Nov. 30. Russiam authorities have also uttered readiness to support an OPEC decision to freeze oil output, Russian Energy Minister Alexander Novak said on Wednesday.
This analyst retains the view that current tough negotiations are a necessary step to achieving a deal at the end of the month. However, we are not convinced that OPEC can deliver the 32.5 – 33.0 mbd of production that it announced in Algiers.
For now, we hold a cap of 33.3 mbd on Q2-Q4’17 OPEC output, which is sufficient to tighten oil markets.
While an informal meeting of OPEC members is likely to be convened in the Qatari capital, Doha, on Friday to build consensus over decisions taken by the group in September, an Algerian energy source said on Wednesday.
Prices rallied on Tuesday amid reports that several OPEC members were engaged in a last-minute push to overcome divisions between the cartel’s biggest producers.
The oil group reached an agreement to cap output to a range of 32.5 million to 33.0 million barrels per day in talks held in Algeria in late September. However, OPEC said it won’t finalize details on individual output quotas until its next official meeting in Vienna on November 30.
Ongoing high volatility in oil prices leads us to prefer exposure to upside price risks via a call spread, selling the $60 call against being long the $55/bbl call.
We advise initiating longs in the June’17 Brent 55-60 call spread at $1.91/bbl.


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