On Friday, oil prices experienced an uptick, only to anticipate a third consecutive week of decline which is attributed to emerging indications of weakened demand, coupled with growing anticipation surrounding a pivotal meeting of OPEC and its allies scheduled for this month. The outcome of this gathering is poised to shape the group’s subsequent decisions on production.
In a dynamic market scenario, oil prices experienced a surge on Friday, only to brace for a third consecutive week of decline. The fluctuation comes as indicators point towards a deceleration in demand and anticipation builds around the upcoming crucial meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies later this month. The outcome of this gathering will chart the course for the group’s future production strategies.
As of 1109 GMT on Friday, Brent crude futures for January demonstrated an 84-cent increase, equivalent to a 1.1% rise, settling at $80.85 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures for December experienced a 78-cent uptick, reflecting a 1% increase, reaching $76.52 per barrel. Despite this temporary upswing, both contracts are anticipated to register a 5% decline over the week.
The concerns surrounding demand are multifaceted. Commerzbank, expressing apprehension, noted that the “fear of production outages related to the Middle East conflict” is waning. Contributing to the apprehension is weak economic data from China this week, influencing demand negatively. Notably, Chinese refiners, traditionally among the largest consumers of crude oil from Saudi Arabia, the world’s foremost exporter, have requested reduced supply for December.
The looming meeting of the OPEC+ alliance, consisting of both OPEC and non-OPEC countries, is scheduled for November 26, where discussions will revolve around setting production policies. A focal point of interest for investors will be whether Saudi Arabia opts to prolong its voluntary cut of 1 million barrels per day, slated to conclude by the year’s end. Helima Croft, an analyst at RBC Capital Markets, asserts that the likelihood of Saudi Arabia extending its unilateral cut into the first quarter of 2024 is mounting. This speculation arises from renewed market anxieties about Chinese demand and broader macroeconomic conditions.
Citi analysts project that the downward pressure on oil prices may ease, and a recovery could follow after the recent dip, which marked the lowest prices since July. They foresee a consolidation of prices due to a reduction in refinery maintenance activities and a reevaluation of the risk-reward dynamic for investors amidst the ongoing sell-off.
In summary, the upcoming OPEC meeting assumes pivotal importance in shaping the trajectory of oil prices, particularly against the backdrop of diminishing demand and the onset of the winter season. The market awaits crucial decisions that will undoubtedly influence the future course of the oil industry.
Source: Reuters
