SINGAPORE: Oil futures experienced a slight uptick on Monday, continuing their ascent amid expectations that OPEC+ will implement deeper supply cuts to stabilize prices. The recent decline in oil prices over the past four weeks, attributed to easing concerns about disruptions in Middle East supply due to the Israel-Hamas conflict, has prompted speculation of additional measures.
Brent crude futures increased by 66 cents, or 0.8 per cent, reaching $81.27 per barrel by 0700 GMT. Simultaneously, US West Texas Intermediate crude rose by 60 cents, or 0.8 per cent, to $76.49 per barrel. The front-month December contract is set to expire later today, while the more active January futures gained 65 cents, or 0.9 per cent, reaching $76.69 per barrel.
Both contracts saw a 4 per cent surge on Friday following reports from three OPEC+ sources indicating that the producer group, consisting of the Organization of the Petroleum Exporting Countries and their allies, including Russia, will discuss the possibility of additional oil supply cuts during their meeting on Nov. 26.
Oil prices have experienced a nearly 20 per cent decrease since late September, and last week, prompt inter-month spreads for Brent and WTI shifted into contango. In a contango market, prompt prices are lower than those in future months, signaling ample supply.
Jorge Leon, Senior Vice President of Oil Market Research at Rystad Energy, noted that Saudi Arabia, OPEC's de-facto leader, is navigating the delicate balance of maintaining high oil prices by restricting supply while acknowledging that such actions could lead to a further decline in overall market share.
Leon stated, "Oil markets will be looking to see if Saudi Arabia extends these cuts into 2024 or if it chooses to gradually unwind them or simply let them expire at the end of this year," referencing the International Monetary Fund's estimate of Saudi Arabia's oil fiscal break-even price at $86 a barrel. "Our analysis suggests that (the) Saudis will need to keep giving away market share, at least until June 2024, to achieve that price level." IG analyst Tony Sycamore suggested that WTI prices might approach $80 a barrel if OPEC+ announces deeper cuts at the upcoming meeting. However, he cautioned that a drop below $72 could prompt the Biden administration to replenish the US Strategic Petroleum Reserve, potentially influencing market dynamics.
Investors are also monitoring potential disruptions in Russian crude oil trade following Washington's imposition of sanctions on three ships transporting Sokol crude to India. Moscow's recent decision to lift a ban on gasoline exports and the removal of most restrictions on diesel exports last month could impact global fuel supplies.
Furthermore, US energy firms increased oil and gas rigs for the first time in three weeks, according to energy services firm Baker Hughes. The oil and gas rig count serves as an early indicator of future output.
In the Middle East, US and Israeli officials reported progress in negotiations for the release of hostages in the besieged Gaza enclave despite ongoing conflict. — REUTERS
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