Oil prices experienced a decline on Monday, with the Brent benchmark slipping below the $80 per barrel mark. The drop was attributed to the anticipation surrounding the upcoming OPEC+ meeting scheduled for this week, where discussions about supply constraints extending into 2024 are eagerly awaited by investors.
Brent crude futures showed a decrease of 91 cents, marking a 1.1% drop and settling at $79.67 per barrel. Simultaneously, US West Texas Intermediate (WTI) crude futures experienced a decline of 89 cents, or 1.2%, closing at $74.65.
In the initial stages of trading, both contracts saw a $1 decrease. This followed the positive momentum of the previous week when Saudi Arabia and Russia’s potential extension of voluntary supply cuts into 2024 fueled expectations. The OPEC+ alliance was also speculated to discuss plans for further production reduction.
However, mid-week brought a setback as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, decided to postpone a ministerial meeting to November 30. The delay was attributed to the need to resolve differences regarding production targets for African producers. Despite initial concerns, the group appears to be moving towards a compromise, according to four OPEC+ sources reported by Reuters on Friday.
ING analysts emphasized the persistently negative market sentiment, citing ongoing disputes within OPEC+ regarding production quotas. Despite this, they anticipate Saudi Arabia to extend its additional voluntary cut of 1 million barrels per day into the following year.
“If we do not see this, it would put further downward pressure on the market,” warned ING analysts in a note.
Goldman Sachs analysts noted a decline in estimated exports by OPEC countries, reaching 1.3 million barrels per day below April levels, aligning with the group’s supply targets. The bank expressed the expectation of an extension of unilateral cuts by Saudi Arabia and Russia through at least the first quarter of 2024.
However, the United Arab Emirates plans to increase exports of its flagship Murban crude early next year, according to traders and Reuters data. In the United States, concerns arise over higher crude stockpiles potentially adding downward pressure on prices, as noted by analysts.
Iraq’s efforts to resume northern crude exports via Turkey continue, with officials set to meet representatives of international oil companies and Iraqi Kurdish officials in early December to discuss crucial contract changes.
The International Energy Agency (IEA) anticipates a slight surplus in global oil markets in 2024, even if OPEC+ nations extend their cuts into the next year. Commonwealth Bank analyst Vivek Dhar emphasized the need for significant supply discipline from OPEC+ to address market worries about a potential deep surplus in oil markets next year, especially with the IEA forecasting a mere 0.9 million barrels per day growth in global oil demand for 2024, down from 2.4 million barrels per day growth in 2023.
The recent stabilization of oil prices is further attributed to reduced geopolitical tensions in the Middle East following a ceasefire in Gaza and an exchange of hostages. Investors will closely monitor the outcomes of the OPEC+ meeting for potential insights into the future trajectory of oil prices.
In conclusion, the recent OPEC+ developments and geopolitical resolutions have failed to dispel concerns as oil prices continue their decline, adding a layer of uncertainty to the global energy landscape.
Source: Reuters
