WTI corrects OPEC-story supply on upbeat Chinese weekend data

• Chinese surprise data elevated risk appetite at the start of the week.
• WTI surges over 1.4% and corrects, in part, Friday's crucial sell-off. 
• Saudis subsidising other members for other members excessive production weighs on outlook.

Oil prices are correcting Friday's supply in Asia, with US WTI moving higher on positive weekend Chinese data, popping around 1.4% and rising from a low of $55.22 to a high of $55.98. 
On Friday, WTI was taken down heavily from the $58 handle to a low of $55.01 while investors withdrew the likelihood of a production-cut extension at this week’s OPEC + meeting.  

On the weekend, there were positive news in economic data from China. Both manufacturing and non-manufacturing PMIs jumped significantly in November – analysts at ANZ Bank suggest the data indicates a high possibility of China reaching 6.2% annual GDP growth in 2019.

Key comments

• However, the surging headline manufacturing PMI masks deflationary risks in the sector.
• The rebound in the non-manufacturing sector appears to be more meaningful.

OPEC in the spotlight

Meanwhile, a growing theme has been with the Saudis subsidising other members for other members excessive production and reports were circulating that the nation would not be willing to continue doing so. Ina Bloomberg report, the article stated that "OPEC and allied crude producers are averse to deepening output cuts when they convene". Additionally, there were fears that Russia would block an OPEC+ quota extension.

The price of oil had otherwise been elevated in a correction from the early October lows down below the $51 handle on the sentiment of production cuts with WTI moving up from the depths of the 2018 lows in the $42 handle to a YTD high on the $66 handle. 

Analysts at TD Securities are of the view that crude oil prices will ease off the recent highs in the coming weeks. "Indeed, large surpluses in early 2020 still linger on the horizon, especially as OPEC+ will likely hesitate to deepen output cuts when they meet in December, which suggests this latest rally will likely run out of steam."

WTI levels

Bulls dropped below the 200-day moving average, previously capped by the 61.8% Fibonacci resistance of the Sep swing highs to October swing lows. A 50% mean reversion level of the recent range opens risk to 55 the figure. Bulls will look for a 78.6% Fibonacci level around 60.70 on a break higher again.