It’s been another mixed start to the European session on Wednesday and US futures are also pointing to a similar open on Wall Street, with focus remaining on the oil market in the absence of any other major catalysts.
Having flirted with sub-$40 levels last week, oil has pared its recent gains over the last 24 hours after running into resistance around $43.25 in WTI crude and $45.50 in Brent.
The overriding story in the oil markets right now is one of oversupply once again, with the shale industry in the US in a much better position than previously anticipated to take on OPEC at these lower levels.
All of a sudden, rather than talking about letting the market drive out higher cost producers, it seems that members are once getting worried that the re-balancing has occurred and production is not feasible at these prices. Reports that a meeting will now take place on the sidelines of the International Energy Forum next month has prompted speculation that a coordinated freeze or cut may be back on the table, which has helped support prices over the last week.
The issue remains though that OPEC has not been functioning very well for some time and while the bleak outlook may force members to work together on a solution, it’s far from guaranteed that anything along the lines of a freeze or cut will be agreed. That said, it may be enough in the short term to help oil prices continue to pare some of the sizable losses sustained since early June.
Oils move lower over the last 24 hours has been aided by the 2.1 million barrel build in crude inventories last week, as reported by API on Tuesday. Should EIA report similar findings today, it could put even more pressure on oil prices and push Brent and WTI back below $44-44.30 and $42 support, respectively.