Oil investors ease back as market steadies before OPEC talks

Bloomberg

Oil investors are playing it safe as OPEC hammers out the details of a deal to trim output. Money managers reduced bets on falling prices to the lowest since
May as oil held above $50 a barrel, prolonging a rally that began when the
Organization for Petroleum Exporting Countries announced a deal to cut production to between 32.5 million and 33 million barrels a day. The group plans to finalize the agreement at a meeting in Vienna on November 30.
“The shorts are not laughing off this OPEC deal anymore,” Phil Flynn, a market analyst at Price Futures Group in Chicago, said in a phone interview. “There’s a growing realization that there’s going to be a deal to lock in production. Things will be relatively calm until we get the agreements.”
Saudi Arabia’s energy minister Khalid Al-Falih said Oct. 19 that many nations are willing to join OPEC in cutting production. So far, Russia has said it’s considering taking steps to stabilize the market. Alexander Novak, the country’s energy minister, said Sunday that “many scenarios” are being discussed. Venezuela President Nicolas Maduro, on a tour of oil-producing countries to boost support for the deal, said Oct. 21 he’s in favor of inviting the U.S. to the next OPEC meeting and creating an “alliance” of OPEC and non-OPEC nations.
“This week the market is in a pause after the run-up to $50,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s still a lot of question about what OPEC is actually going to do next month. Absent that, people are waiting for some more direction than we have now.” In addition to slashing short bets in West Texas Intermediate crude by 21 percent during the week ended Oct. 18, hedge funds also reduced their long positions by 3.2 percent from a two-year high, according to the Commodity Futures Trading Commission. Net longs increased to the highest in two years.
“The market just wants to see the proof in the pudding,” said Carl Larry, director of oil and gas at consultant Frost & Sullivan in Houston. “We got to $50. That’s as good as it’s getting, going into the November election and the actual OPEC meeting.”