By Ken Afor
On Monday, oil futures rose slightly, building on recent gains in hope that OPEC+ will reduce supply further to keep costs up following four weeks of declining costs, as worries over potential supply issues in the Middle East, triggered by the Israel-Hamas conflict abated.
By 0400 GMT on Monday, Brent crude futures had risen by 0.7%, climbing 57 cents to $81.18 per barrel. At the same time, U.S. West Texas Intermediate (WTI) crude rose 51 cents, an 0.7% increase, to $76.40 per barrel.
The December contract, nearing expiration on the same day, saw a 0.7% increase as well, standing at $76.59 a barrel following a 55 cent jump.
On Friday, the two contracts closed 4% higher after three OPEC+ sources informed Reuters that the producer group, composed of the Organization of the Petroleum Exporting Countries and their allies such as Russia, is debating the prospect of further oil supply reductions when it convenes on November 26.
Since late September, there has been a decline of almost 20% in oil prices, and WTI and Brent inter-month spreads for prompt delivery moved into a contango market last week. This is an indication of sufficient supply since prompt prices are lower than those in upcoming months in a contango market.
“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,” Goldman Sachs analysts said in a note.
The bank predicts that OPEC+ production cuts will remain intact until 2024, and that Saudi Arabia’s 1 million barrel-per-day cut will be extended through the second quarter of 2021, before being gradually reversed from July onwards.
Tony Sycamore, an IG analyst, suggested that WTI prices can increase to around $80 per barrel if OPEC+ chooses to enact more significant reductions during their upcoming meeting.
He further noted that a decrease below $72 per barrel might motivate the Biden administration to replenish the U.S. Strategic Petroleum Reserve.
“All of which suggest that a rebound in prices is likely in the first half of this week,” he added.
Investors are keeping a close watch on possible disruptions in the Russian crude oil trade due to the sanctions imposed by the US government on three ships that had transported Sokol crude to India.
Friday saw Moscow scrap their ban on the export of gasoline, which could add to the available global supplies of the motor fuel. This follows the removal of most limitations on the export of diesel a month ago.
U.S. and Israeli officials said a deal that would result in the liberation of some of the hostages being held inside the hard-pressed Gaza Strip seemed to be within reach, despite ongoing clashes in the Middle East.
Last Friday, energy services firm Baker Hughes reported that U.S. energy firms had added oil and gas rigs for the first time in three weeks, a sign that could be indicative of future oil and gas production.
