International oil prices closed higher for the second consecutive day on Monday (20th) as some traders were certain that the Organization of the Petroleum Exporting Countries and its allies (known as OPEC+) would agree to extend production cuts at the upcoming meeting. Crude oil prices fell to a 4-month low last week.
energy commodity prices
- West Texas Intermediate (WTI) crude oil futures for December delivery rose $1.71, or nearly 2.3%, to settle at $77.60 a barrel. The futures expire at the close of trading today.
- West Texas Intermediate (WTI) crude oil futures for January delivery rose $1.79, or nearly 2.4%, to settle at $77.83 a barrel.
- Brent crude oil futures for January delivery rose $1.71, or 2.1%, to $82.32 a barrel.
- Gasoline futures for December delivery rose 1.9% to settle at $2.23 a gallon.
- Thermal fuel futures for December delivery rose 2.8% to settle at $2.85 a gallon.
- Natural gas futures for December delivery fell 2.6% to settle at $2.88 per million Btu.
Phil Flynn, senior market analyst at Price Futures Group, believes that OPEC+ will definitely extend the production cut period, and there are increasing speculations that they will even cut production significantly again to send a message to the world, “not only because some members are dissatisfied with the Gaza war , but also because they believe speculators have taken control of the market.”
Although oil prices rose last Friday, they still fell for the fourth consecutive week. The Financial Times reported that Saudi Arabia plans to extend its current production cut of 1 million barrels per day until next year, so there is some short covering. OPEC+ will consider further production cuts before its meeting on November 26.
Jorge Leon, senior vice president of Rystad Energy, mentioned in the report: “No matter what method is adopted, Saudi Arabia’s decision to reduce production will ultimately determine the short-term future of global oil prices.”
He said Saudi Arabia is balancing supply restrictions and keeping prices high, knowing that doing so will lead to a further decline in its overall market share.
Oil futures rose over the summer, hitting their highest price in more than a year at the end of September, with Brent crude hitting $100 a barrel, while WTI crude broke above $95 before falling back.
As prices rise, Saudi Arabia added another 1 million barrels per day of production cuts to the existing production cuts in July this year, and will continue to implement them until the end of this year.
Hamas attacked southern Israel on October 7, which subsequently triggered the Israel-Kazakhstan war. As the market worried that the conflict between the two sides might expand to affect the flow of crude oil in the Middle East, oil prices experienced a moderate risk premium. However, since the Israel-Kazakhstan conflict never involved Iran, the premium was Fading in late October, crude oil prices fell below $80 a barrel last week as concerns about oversupply took center stage.
Leon believes that the recent plunge may indicate the outcome of the OPEC meeting, because Saudi Arabia has repeatedly stated that its price bottom line is above US$80 per barrel.
Traders will be watching to see whether Saudi Arabia extends production cuts until 2024 before phasing them out, or lets them expire at the end of the year.
Robbie Fraser, global research and analysis manager at Schneider Electric, said some sources indicate that OPEC+ is considering expanding production cuts in addition to the current voluntary production cuts by Ukraine and Russia. If true, it would immediately boost crude oil prices. However, as Ukraine and Russia continue to reduce production, it has opened the door for other producing countries (especially the United States) to take market share from them.