On Friday, oil prices experienced an increase, but they are poised to decline for the third consecutive week. This downturn in oil prices is attributed to indications of weakening demand and a shift in market focus toward a significant meeting of OPEC and its allies scheduled for later this month. This gathering is expected to play a decisive role in shaping the group’s future actions regarding production.
As of 1109 GMT, Brent crude futures for January exhibited an increase of 84 cents, equivalent to a 1.1% rise, reaching $80.85 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures for December climbed by 78 cents, marking a 1% gain and settling at $76.52. Despite this temporary uptick, both contracts are poised to register a weekly decrease of approximately 5%.
The backdrop of this fluctuation is painted by signs of diminishing demand, exacerbated by concerns over a potential slowdown in the wake of weak economic data from China. Analysts from Commerzbank pointed out that the previous fear of production outages in the Middle East has given way to apprehensions about the demand outlook. Chinese refiners, traditionally significant purchasers of crude oil from Saudi Arabia, the world’s leading exporter, have requested reduced supply for December.
The OPEC+ alliance, consisting of both OPEC and non-OPEC nations, is gearing up for a critical meeting on November 26, where decisions on production policies will shape the trajectory of oil prices. Of particular interest to investors is whether Saudi Arabia will extend its voluntary cut of 1 million barrels per day, set to conclude at the end of this year. Helima Croft, an analyst at RBC Capital Markets, noted the increasing likelihood of Saudi Arabia prolonging this cut well into the first quarter of 2024, fueled by renewed concerns about Chinese demand and the broader macroeconomic outlook.
Analysts at Citi offered a more optimistic perspective, suggesting that the downward pressure on prices is likely to ease, with a subsequent recovery following this week’s dip to the lowest levels since July. They anticipate a consolidation of prices, attributing it to a reduction in refinery maintenance activities and a shift in the risk-reward dynamics for investors prompted by the recent sell-off.
In summary, as the oil market navigates the complexities of slowing demand and the impending winter season, all eyes are on the OPEC+ meeting later this month. The decisions made therein are poised to play a decisive role in determining the future trajectory of oil prices amidst the prevailing market uncertainties.
Source: Reuters
