Following one of the most stunning presidential elections in American history, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained nearly 2% on below average volume Wednesday. Still, data suggest some oil bulls are taking a respite from the commodity.
That ahead of a widely anticipated meeting for the Organization of Petroleum Exporting Countries (OPEC) later this month.
OPEC plans to diminish output to a range of 32.5 to 33.0 million barrels per day from its current estimated output of 33.24 million barrels per day. While Saudi Arabia, OPEC’s biggest producer, has agreed to reduce output, Iran, Libya and Nigeria might not follow suit.
Obviously, production is a key element in the decision-making process regarding energy investments. Currently, oil investors face conflicting reports regarding output. For example, Venezuela’s crude output is plunging to multi-year lows while Algeria is looking to boost production.
“According to Reuters, hedge funds ramped up their net long positions by 218 MMBO in the two weeks after the surprise accord was reached at the end of OPEC’s Sept. 28 meeting. The deal sparked a short-covering rally, resulting in the unwinding of many extra bearish positions. Prices have since returned to their pre-deal levels,” reports OilPrice.com.
Elevated levels of production remain an issue for oil as well. OPEC has kept up production to pressure high-cost rivals, such as the developing U.S. shale oil producers.