FX168 Financial News Agency (North America) News: Oil prices rose more than 2% on Monday amid widespread expectations that OPEC+ will announce further production cuts after a meeting of member states early next week.
WTI’s December expiration price closed at $77.60/barrel, up $1.71/barrel, or 2.3%. The more active January futures rose $2.39/barrel to close at $77.83/barrel, an increase of 1.8%.
(U.S. West Texas Intermediate (WTI) crude oil futures trend chart, source: FX168)
The settlement price of Brent crude oil futures rose by US$1.71/barrel, or 2.1%, to close at US$82.32/barrel.
(Brent crude oil futures trend chart, source: FX168)
[Market News Analysis]
Both crude benchmarks have plummeted for four straight weeks but began to rebound on Friday, rising 4% on profit-taking, after three OPEC+ sources told Reuters The group of producing countries is meeting on November 26 to consider whether to further cut supply.
“OPEC’s comments point to further production cuts,” said John Kilduff, partner at Again Capital LLC. “I expect any production cuts to be mild. The Saudis have cut so much production, I don’t know they How much more can be done.”
The probability that OPEC+ will deepen production cuts is 53%. According to CME Group crude oil options market data, oil options market traders’ positions show that there is more than a 53% chance that OPEC+ will decide to further cut production at the upcoming meeting, while the possibility of maintaining the existing production reduction plan is more than 53%. Sex is about 40%. Expectations that OPEC leader Saudi Arabia will extend an agreement to cut production by 1 million barrels per day until early next year have helped support crude prices that plunged earlier this month. Speculation will remain rife ahead of the Nov. 26 OPEC meeting as to whether Saudi Arabia and its allies will choose to cut production further.
Goldman Sachs said that based on its statistical model of OPEC decision-making, it cannot rule out the possibility of further production cuts given falling speculative positions and spreads and higher-than-expected inventories. Goldman Sachs predicts that Saudi Arabia’s unilateral production cut of 1 million barrels per day will be extended to the second quarter of 2024 and will be gradually reversed starting in July.
Oil prices have fallen nearly 20% since the end of September as crude output in the United States, the world’s top producer, remains at historically high levels and amid concerns about rising demand, especially from China, the top oil importer.
The monthly spread between Brent and West Texas Intermediate fell into contango last week, with prompt crude prices lower than they will be in the coming months, signaling ample supply.
Traders are also watching for signs of demand destruction from a potential U.S. recession in 2024 and considering last week’s warning of possible deflation from Walmart, the largest U.S. retailer. But most importantly, traders are awaiting the OPEC+ meeting scheduled for Sunday.
Andrew Lipow, president of Lipow Oil Associates, said members will focus on supply and demand rather than using crude as a weapon against the United States, which is backing Israel in its seven-week war with Hamas. “Some countries are worried that the war will spread into a regional conflict,” Lipow said. “They want to see their oil continue to flow.”
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Looking at the broader context of global oil markets, Brent crude oil futures climbing above $81 per barrel is a significant development. This surge was influenced not only by Gulf-specific catalysts, but also by broader factors such as a weak U.S. dollar.
WTI crude oil finds support. This has fueled speculation that energy purchases may increase. The commodity’s range-bound moves show solid support and limited upside, setting the stage for this week’s moves.
Brent crude oil’s recent fall below $80 per barrel is “too exaggerated.” Deutsche Bank analyst Michael Hsueh said prices below $80 a barrel were too low for Brent crude. Based on a crude oil inventory deficit forecast of 300,000 barrels per day in the fourth quarter, the average price of Brent crude oil in the fourth quarter may reach $88/barrel, and may rise to $90/barrel in the remainder of the quarter. . The possibility of further tightening of sanctions on Iran, as well as limited new investment plans in Venezuela so far, have supported Brent crude prices. Assuming that OPEC policy remains unchanged in the first half of 2024, the supply surplus will reach 500,000 barrels per day. But at this weekend’s meeting, OPEC is likely to deepen its production reduction policy, and we are unwilling to bet against OPEC. If daily supply is reduced by 1 million barrels in the first quarter of next year, it will easily cause Brent crude oil prices to rise back to US$90 per barrel.
Traders are eyeing potential speculative buying in crude oil trading as global risk sentiment appears to be strengthening and optimism returns among financial institutions. The commodity’s speculative price range this week is expected to be between $72.40/barrel and $83.10/barrel. While the upcoming U.S. Thanksgiving holiday may impact trading volumes, WTI’s moves early this week will set the tone for potential speculative buying.
[Focus on financial data and events in the next trading day (Beijing time)]
① To be determined, a new round of price adjustment window for domestic refined oil products will open
②08:30 The Reserve Bank of Australia releases the minutes of its November monetary policy meeting
③15:00 Swiss trade account for October
④18:15 Bank of England Governor Bailey gave testimony in Parliament
⑤21:30 Canada October CPI monthly rate
⑥23:00 Annualized total number of existing home sales in the United States in October
⑦The Federal Reserve released the minutes of its November monetary policy meeting at 03:00 the next day.
⑧API crude oil inventories in the United States for the week to November 17 at 05:30 the next day