Crude oil traders became jittery at the first trading session of the week, pushing oil prices to fall more than 1.5%.

The plunge is largely attributed to growing concerns amongst oil traders on what the OPEC+ meeting outcome will be, as some leading oil producers like Nigeria seems to be unhappy with the prevailing status quo, on the bias that it hampers its oil revenue growth.

READ: House of Reps summon Emefiele, NNPC GMD over unremitted N3.24 trillion

• At the time of writing, Brent crude futures prices were down by more than 1.7% to trade at $47.35 a barrel.
• U.S. West Texas Intermediate crude futures dropped 1.62% to $44.83 a barrel.

However, both major crude oil benchmarks are still set for a gain of more than 20% in November, the highest monthly gains since May, boosted by hopes for three promising COVID-19 vaccines in curbing its spread and thus boost fuel demands.

READ: FEC approves $1.96 billion for Kano-Niger Republic railway

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, elaborated on expectations from the pending OPEC+ meeting by market players saying.

He said, “OPEC+ two-year-long strategic agreement aligns the group’s production silhouette with demand, while ensuring that the alliance continues to supply half of the world’s needed barrels – in line with its market share, simultaneously drawing down inventories.

READ: Stellar outperforms many Cryptos, yearly gain hits 233%

“After supply-dominated price dynamics over the previous business cycle, COVID-19 containment measures have turned demand into the market’s dominant driver, and this will continue to be the case until a successful vaccine is fully rolled out around the globe.”

READ: Investment bank with over $35 billion assets plans investing in bitcoin

Bottom line

Price consolidation in the black fossil market remains in play at least for the near term, after a strong rise in crude prices over the past 2-3 weeks, coupled with Thanksgiving holidays observed in America, reduced trading volumes.

However, oil traders still remain constructive on oil markets recovery and crude oil stockpiles are yet to come down to normal levels.

The demand for gold diminished at the last trading session of the week, as it fell to $1,700 territory — the first time since June.

What we know

Gold futures lost about 1.3% to close at $1,1781.90/ounce. It dropped as low as $1,770.65, a price not seen since June 22.

READ: Nigerian billionaire, Benedict Peters Plans to mine Platinium in Zimbabwe

Gold bulls have been under intense pressure amid significant sell-offs recorded in recent times, amid positive news on COVID-19 vaccines coupled with strong bias coming from the world’s largest economy, hinting that there would be a smooth transition of power. All of these factors have kept gold bulls in the dust.

What this means

Gold traders are arbitrarily reducing their long bets, as it seems odd for any investor to go bullish on the precious metal, taking to account that it’s set for the third straight weekly loss.

READ: Pigs on a rampage, Bitcoin drops $2,000

Stephen Innes, Chief Global Market Strategist at Axi, in an email sent to Nairametrics, gave key fundamentals giving the gold bears enough gas to break the precious metal below the $1,800 price level:

“The positive correlation between gold and the SPX since March flipped after Pfizer’s vaccine announcement on Nov. 9, while negative real yields are not having a positive effect on the precious metal. A transition from disinflationary to inflationary support for gold could take time and ultimately leaves prices vulnerable to more profit-taking and the establishment of more shorts in the near-term.

READ: $385 million worth of Bitcoin moved by unknown identity

“Gold rout continues as investors embrace vaccine news. The break of USD1,800/oz support may take prices near USD1,750/oz as surging investor optimism due to promising COVID-19 vaccines has undermined gold and silver.”

What to expect

The precious metal will continue to be under immense pressure from the gold bears, taking into account the commanding macro theme related to a vaccine recovery and the reduced risks associated with central bank’s debt monetization, or the pursuit of quasi-modern monetary theory.

READ: ValuAlliance distributes value fund of N10 per unit for H1, 2020

Oil prices finished higher on Wednesday, with help attached to progress made on vaccines for COVID-19.

There is also renewed hope for oil prices as backwardation in the oil markets and OPEC+ production cuts prop up the markets despite the coronavirus cases that keep rising worldwide.

Brent oil rose to as high as $48.90. Also, West Texas Intermediate rose as high as $46.20 a barrel on the New York Mercantile Exchange.

“Optimism around vaccine developments continues to buoy sentiment, despite the current lockdowns that we are seeing across Europe, and with the numbers of U.S. COVID-19 cases now passing the 12 million mark,” said Warren Patterson, Head of Commodities Strategy at ING.

READ: Mike Adenuga: The journey from petty trade to Conoil and Glo

This rise in Oil, moved prices to their highest price since March, after AstraZeneca also declared a great update to the advancement of its COVID-19 vaccine.

The drugmaker in a joint effort with the University of Oxford – said its vaccine was 70% powerful at preventing COVID-19 in a preliminary trial of about 20,000 volunteers.

AstraZeneca’s vaccine progress denotes the third sure vaccine from organizations after Moderna inc., Pfizer and BioNTech, are hurrying to put up a reasonable drug for sale to the public.

In any case, possibilities for an immunization are needed ahead of a potential third wave of the COVID-19 virus. The US recorded more COVID-19 cases this week as indicated by the COVID Tracking Project.

READ: Investment bank with over $35 billion assets plans investing in bitcoin

Backwardation

Another reason why prices are rising is because of what traders call Backwardation. Oil prices are historically bullish when backwardation occurs in the markets. It is a situation where traders no longer have an incentive to store oil and sell it later.

Right now, they are selling it because prices could be lower in the future. The demand from Asia also makes the market feel balanced now.

When the current price of oil is higher than prices trading in the futures market, traders sell live barrels and buy oil futures contracts, which leads to a convergence of both prices.

This can occur because of a higher demand for oil than the contract in the futures market. Traders use backwardation to make a profit, by selling short at the current price and buy at the lower futures price.

OPEC+

To bring support to prices, OPEC+ and partners including Russia will expand the span of their production cuts when they meet soon, to balance frail demand over the winter months.

Recall, OPEC+ cut production in April, as oil demand imploded during lockdowns. Though there were talks about returning about 2m barrels a day of production to the market in January 2021, there is a strong possibility that they will postpone the return of these barrels.

READ: CBN launches Private Sector-led Accelerated Agriculture Development Scheme

Goldman said it expects OPEC+ to delay its planned 2 million bpd January production ramp-up for three months, citing coordinated measures to curtail output as “the optimal near-term action,” according to their experts.

There was a lot of purchasing demand, which has pushed prices to this level. This was overshadowed, as there is a worry over worldwide demand, as COVID-19 flare-up proceed far and wide. Prices were likewise increased by information demonstrating a bounce back in China, Japan and other Asian buyers.

The gathering, known as OPEC+, has been cutting production by about 7.7 million barrels every day (bpd), with compliance seen at 96% in October, and had wanted to maintain cuts by 2 million bpd from January.

OPEC+ is set to hold a meeting on Tuesday that could prescribe changes to production cuts when all the members meet on Nov. 30 and Dec. 1.

READ: Gold prices under pressure, U.S dollar ticks up

“There is no denying that the oil market is fully in the hands of OPEC+,” said Bjarne Schieldrop.

The organisation is the only reason why oil prices today are not $20 a barrel. As such, their upcoming meeting on Nov 30-Dec 1 is hugely important.

Nigeria, however, wants to increase production and their quota as the revenue of the country dwindles with foreign currencies getting scarcer.

The more production means Nigeria would be able to make more oil sales. Hopefully, the meeting would give more room for Nigeria to increase its quota.