Oil Trading Choppy As Doubt Intensifies Over OPEC Boosting Output

Impending U.S. pandemic stimulus pullbacks is also causing risk aversion: File Image/Pixabay

Doubt appeared to influence crude traders on Tuesday in advance of a much-anticipated meeting of the Organization of the Petroleum Exporting Countries (OPEC), which has come under fire for not responding to the global energy crunch – and prices dipped accordingly.

With the widespread expectation that OPEC on November 4 will stick to its modest 400,000 barrels per day (bpd) increase in oil supplies, West Texas Intermediate slipped 14 cents to settle at $83.91 per barrel.

Brent rose 1 cent to settle at $84.72 per barrel.

Pavel Molchanov, an analyst at Raymond James & Associates Inc., said, "OPEC is coming under more political pressure from importing countries to boost supply because oil prices are at the highest level in seven years.

"Balancing the question mark about demand with political pressure on the other end of the spectrum -- it seems like maintaining status quo is the most logical approach for OPEC to take right now."

Still, Japan on Tuesday became the latest country to lobby for higher output: trade and industry minister Koichi Hagiuda urged OPEC+ to hold discussions to stabilize the market.

However, Julian Lee, oil strategist at Bloomberg, noted that while technically 23 nations in the OPEC+ alliance have the capacity to pump 5.6 million bpd more than they are now, "Far fewer nations can materially help if the clamour for crude intensifies."

He elaborated, "While, Saudi Arabia, Iraq and the United Arab Emirates can all add more than their OPEC+ baselines imply, others - notably Russia, Angola, Nigeria, Malaysia, and Kuwait - can contribute a lot less than those numbers suggest."

Another factor said to have influenced trading on Tuesday is the commencement of the two-day U.S.  Federal Open Market Committee meeting: the Federal Reserve is expected to announce this week the scaling back of monetary pandemic stimulus amid greater concern over inflation.

Ed Moya, senior market analyst at Oanda Corp., pointed out that the prospect of scaling back is causing risk aversion among investors and a stronger dollar.