With the OPEC+ contemplating deepening supply cuts, oil futures edged up on Monday. The anticipation of the additional supply tightening is driven by concerns over a decline in prices amid reduced fears of disruptions in Middle East supply.
OPEC+ consists of members of the Organization of Petroleum Exporting Countries, alongside allies led by Russia.
Brent crude futures increased by 0.7 percent to $81.18 a barrel as of 04:00 GMT. Meanwhile, the US West Texas Intermediate (WTI) crude also rose by 0.7 percent, hitting $76.40 a barrel.
The January futures further saw an increase of 55 cents or 0.7 percent at $76.59 per barrel. The December contract is set to expire later today. Earlier on Friday, both contracts already posted a 4 percent increase. This development follows reports surfacing that OPEC+ is mulling over making further cuts during its upcoming meeting. They are set to convene on November 26.
Since late September, oil prices have fallen by nearly 20 percent. Last week, prompt inter-month spreads for both Brent and WTI entered contango. In a contango market, prompt prices are lower than those in future months, which indicates an ample supply.
IG analyst Tony Sycamore shared that prices of oil futures could ascend, citing the potential announcement of deeper cuts by OPEC+. In particular, WTI futures may reach around $80 per barrel.
Meanwhile, according to analysts at Goldman Sachs, “Our statistical model of OPEC decisions suggests that deeper cuts should not be ruled out given the fall in speculative positioning and in time spreads, and higher-than-expected inventories.”
The baseline projection from the bank anticipates the continuation of OPEC+’s production cuts throughout next year.
Additionally, it foresees the unilateral cut of 1 million barrels per day by Saudi Arabia being extended until the second quarter of 2024. Gradual reversal could start in July.
Saudi Arabia, Russia and other OPEC+ members have previously committed to a collective reduction in oil output, amounting to 5.16 million barrels per day (bpd). This represents approximately 5 percent of the daily global demand. It has been implemented through a series of measures initiated since late last year.
These cuts already include the 3.66 million bpd from OPEC+ and supplementary voluntary reductions by Saudi and Russia.
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