By Ken Afor
On Monday, Brent prices declined towards $80 per barrel as market participants anticipated the outcome of the OPEC+ get-together later in the week that could bring about a contract to limit supplies up till 2024.
At 0231 GMT, Brent crude futures dropped 37 cents, or 0.5%, to $80.21 per barrel and U.S. West Texas Intermediate crude futures decreased 36 cents, or 0.5%, to $75.18 a barrel.
Last week, both contracts saw a slight increase in their value, their first weekly gain in five, due to the trust that Saudi Arabia and Russia could go against the grain and maintain their voluntary supply reduction initiatives up until early 2024, as well as the rumors that OPEC+ could soon discuss plans to reduce more.
Last week, OPEC+ – a conglomerate of the Organization of the Petroleum Exporting Countries and their allies, including Russia – postponed a ministerial meeting to Nov. 30 in order to settle differences on production targets for African producers, resulting in a fall in prices.
Four OPEC+ sources informed Reuters on Friday that the group has since then advanced towards an agreement.
Analysts of ING declared that market attitude is still pessimistic in light of the disagreement within OPEC+ in terms of production quotas; however, they anticipate Saudi Arabia will extend its additional generous cut of 1 million barrels per day into the following year.
“Clearly, if we do not see this, it would put further downward pressure on the market, given the surplus over 1Q24,” ING analysts said in a note.
Analysts from Goldman Sachs said in a note that the estimated exports from OPEC countries have gone down to 1.3 million barrels per day below the levels in April, in accordance with the OPEC+ meeting aims.
“We still expect an extension of the unilateral Saudi and Russia cuts through at least 2024Q1, and unchanged group cuts, although a deeper group insurance cut is likely on the table,” the bank added.
The United Arab Emirates is anticipated to enhance its exports of Murban crude at the beginning of the next year, as a result of a current OPEC+ directive and due to refinery upkeep diverting barrels to the global market, traders and Reuters data claim.
The International Energy Agency predicted a slight surplus in worldwide oil supplies in 2024, despite the possibility of OPEC+ countries prolonging their production restraints into the following year.
Commonwealth Bank analyst Vivek Dhar said: “With the IEA forecasting that global oil demand will only grow 0.9 million bpd next year, down from 2.4 million bpd growth in 2023, OPEC+ will have to show significant supply discipline, or at least jawbone such ability, to alleviate market worries of a deep surplus in oil markets next year.”
After the implementation of a ceasefire in Gaza and the exchange of hostages and prisoners, geopolitical tensions in the Middle East have decreased, leading to stabilized oil prices.
