Crude oil prices were higher Tuesday morning as traders anticipate OPEC may announce production cuts. In addition, a trader said that recent data shows that funds are starting to rebuild long positions. File Photo by John Angelillo/UPI | License Photo
Dec. 4 (UPI) -- Crude oil prices looked stronger early Tuesday with ongoing speculation that OPEC may announce production cuts after Thursday's meeting, with analysts adding that funds have restarted to rebuild long positions.
West Texas Intermediate front-month futures were trading 1.8 percent higher at $53.87 per barrel as of 8:33 a.m. EST, ahead of the start of the regular session, while Brent futures traded at $62.77 per barrel, or 1.8 percent higher.
The market is reflecting "optimism with a $5 per barrel bounce from last week's lows in anticipation of future production cuts by OPEC members to stop the price slide and renewed tariff negotiations" between the United States and China, John Thorpe, analyst at Cannon Trading, told UPI.
Thorpe was referring to West Texas Intermediate futures, which he said declined $26 per barrel during November. Leaders from the United States and China agreed on Saturday to a 90-day truce from imposing additional tariffs that had been announced for January. Since the announcement traders have reacted favorably as the agreement diminished worries about an economic slowdown reducing crude oil demand.
"If any cuts are going to be announced, they are expected by 7 a.m. EST on the 6th," Thorpe added.
OPEC will hold a meeting Thursday in Vienna. There has been widespread speculation that the oil cartel would agree on production cuts to help increase oil price levels.
Speculation of a likely production cut announcement by OPEC has been going on for several weeks after crude prices plunged from peaks in early October. Brent crude oil futures had traded on October 3 above $86 per barrel.
Separately, Amir Hekmati, oil futures spec trader at Lucid Energy, told UPI that funds have also started to initiate long positions, after reductions throughout the past couple of months. Long positions are built in anticipation of higher prices ahead.
"Recent CFTC (Commodity Futures Trading Commission) reports show that long positions in WTI have been reduced by 629 million barrels over the last nine weeks. Funds have also begun to initiate long positions with 2 million barrels long being added in the last CFTC Report," he said.
Prices are likely to continue to be volatile in weeks ahead, Hekmati said.
"There are concerns over OPEC unity, and we expect volatility in the price going forward until February of 2019 when we believe the oversupply may begin to reverse," Hekmati added. The comment came Monday after Qatar announced it was withdrawing from OPEC.
The Energy Information Administration will publish its weekly report on Thursday, a day later than usual, due to the Wednesday holiday in observance of the passing of former President George H.W. Bush. U.S. stock and bond markets will be closed on that day.
"Although the crude market will be open, as well as all other U.S. commodity markets, the trading day should be choppy," Cannon Trading's Thorpe said.