Crude oil prices began the week with gains amid mounting expectations that OPEC+ will deepen voluntary production cuts.
Both Brent crude and West Texas Intermediate posted modest gains in mid-morning trade in Asia today, with Brent crude remaining above $81, where it climbed on Friday, and WTI over $76 per barrel.
OPEC+ members are meeting next Sunday to discuss production policy, with Reuters citing three unnamed sources from the cartel as saying OPEC+ will discuss additional production cuts. The discussion is taking place after a four-week losing streak for oil as the war premium from the war between Israel and Hamas dissipated.
“Our statistical model of OPEC decisions suggests that deeper cuts should not be ruled out given the fall in speculative positioning and in timespreads, and higher-than-expected inventories,” Goldman Sachs analysts said, as quoted by Reuters.
“It has become clearer that the oil balance for the remainder of this year is not as tight as initially expected. Higher-than-expected supply has eroded a large amount of the expected deficit over 4Q23. And as things stand, the market is still expected to return to surplus in 1Q24,” ING’s Warren Patterson and Ewa Manthey said on Friday.
At the same time, Bloomberg quoted Patterson as saying in a fresh note that ING expects Saudi Arabia and Russia to deepen their production cuts, adding “However, what is less clear is whether the broader OPEC+ group will make further cuts.”
If other OPEC+ members join the production cuts, the surplus in supply expected for the first quarter of next year may vanish, the ING researchers said.
The chances of other OPEC+ members joining in the cuts remain unclear for now but with oil prices slumping by close to 20% since late September, the possibility of broader cuts is certainly on the table.
Oilprice.com
