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Oil prices soared to their highest in over a month on the news of the deal, with global benchmark Brent crude futures LCOc1 plowing through the $50 a barrel, clinching their biggest daily percentage gains since February. [O/R]
Speculators piled into crude oil options and futures in the days ahead of the OPEC meeting. Volumes in call options that allow the holder to buy January crude futures at $60 per barrel CL600A7 soared to a record a day ahead of the meeting.
As these positions are unwound, oil prices could see some selling, market participants said.
From a technical perspective, for Brent crude LCOc1 to show a bullish trend, prices must rally above $53.70, while U.S. crude West Texas Intermediate (WTI) futures CLc1 would need to surpass $49.85, analysts said.
Brent ended Wednesday's session at $50.47, up $4.09 or 8.8 percent, after hitting an intraday high of $50.49. WTI settled at $49.44, up $4.21, or 9.3 percent with a session high of $49.90,
"I think prices will continue to rally and we could see it move up to that $51.20 and maybe even the $53.60 a barrel level," Dean Rogers, senior analyst at Kase & Co, said.
"The reality is if prices are above $50, people are going to turn wells back on, they're going to start drilling and so the market could, as reality sets back in over the next few weeks, settle back into that $10 range we've been in since summer."
U.S. shale producers are poised to benefit the most - if their production increases, it could offset OPEC's efforts.
"We anticipate oil prices will likely remain rangebound between $50 and $60 per barrel over the next few years," said Rob Thummel, portfolio manager at Tortoise Capital, which has $15 billion in energy assets.
Brent's recent high in October was $53.70, and movement above that point would signal that a further rally is possible, said Fawad Razaqzada, a market analyst at forex.com.
WTI could rally to as much as $59 a barrel over the next few weeks after surpassing $49.85 a barrel, said Walter Zimmerman, chief technical analyst at ICAP. That $49.85 a barrel level represents the Fibonnaci 78.62 retracement of last decline from October to November, Zimmerman said. The market may first pull back, as traders adjust their positions, he said.
(Reporting by Devika Krishna Kumar and Jessica Resnick-Ault; Editing by Marguerita Choy)
