Christmas and New Year’s Week usually feature low-volume, low-volatility moves in the energy complex, but this year may be different because of the bear market in crude oil and the weather market in natural gas. Furthermore, the price action in the energy sector is also being influenced by heightened volatility in the U.S. equity markets.
U.S. West Texas Intermediate and international-bench Brent crude oil futures are in a position to finish the week about 10-percent lower. Volume is expected to be light over the next two weeks, which may lead to further weakness with a few whipsaw moves mixed in due to the thin trading conditions.
Most of the news is bearish, but some traders are trying to build a case for a bottom by introducing the idea that OPEC’s production cuts that start next month will be deeper than expected.
According to Reuters, which reviewed a letter from OPEC’s secretary-general Mohammad Barkindo, “OPEC plans to release a table detailing output cut quotas for its members and allies such as Russia in an effort to shore up the price of crude.”
Barkindo went on to say that in order to reach the proposed cut of 1.2 million barrels per day, the effective reduction for member countries was 3.02 percent. This figure is higher than the initially discussed 2.5 percent as OPEC seeks to accommodate Iran, Libya and Venezuela, which are exempt from any requirement to cut.
This news fueled some light…