Oil prices experienced a modest increase as investor’s exercised caution ahead of a pivotal OPEC+ meeting scheduled to determine output policies for the upcoming months. Brent crude futures inched up by 3 cents to reach USD 81.71 per barrel, while U.S. West Texas Intermediate (WTI) crude futures saw a gain of 17 cents, reaching USD 76.58 per barrel. The market’s anticipation revolves around the possibility of OPEC+ extending or deepening supply cuts, coupled with concerns over disruptions in Kazakh oil output and a weakened U.S. dollar.
OPEC+ meeting dynamics
Investors, mindful of the OPEC+ meeting, covered short positions amid concerns about potential supply disruptions from Kazakhstan. Analysts suggest that unless OPEC+ significantly expands production cuts, WTI is expected to hover around USD 76, maintaining a range of USD 5 each above and below this level. The OPEC+ online ministerial meeting, originally slated for Nov. 26, was delayed and is now due to take place on Thursday. However, OPEC+ sources indicate that the talks might be challenging, and a continuation of the previous agreement is plausible rather than deeper production cuts.
Market response to OPEC+ policy and supply concerns
The outcome of the OPEC+ meeting is crucial for shaping the oil market’s trajectory in 2024. The premium on front-month loading Brent contracts over those loading in six months has reached a two-week high, reflecting growing concerns about potential supply deficits in the long term. Additionally, a severe storm in the Black Sea region disrupted up to 2 million barrels per day of oil exports from Kazakhstan and Russia, heightening worries about short-term supply constraints.
Factors influencing oil prices
Oil prices found support not only in the uncertainties surrounding the OPEC+ meeting but also in the dollar’s weakness. The dollar, near a three-month trough against major currencies, is anticipated to decline further as expectations mount that the Federal Reserve could initiate rate cuts early next year. A weaker dollar typically bolsters oil prices by making oil more affordable for holders of other currencies.
Furthermore, a drop in U.S. crude inventories contributed to the positive sentiment in the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 817,000 barrels last week. While this aligns with the expectations of analysts, who estimated an average fall of about 900,000 barrels, the official U.S. government data on stockpiles is awaited on Wednesday.
The oil market is navigating a delicate balance influenced by the impending OPEC+ decision, supply disruptions, and currency dynamics. Investors are closely monitoring these factors, which collectively shape the short-term and long-term outlook for oil prices. The market remains poised for potential shifts contingent on the outcomes of the OPEC+ meeting and ongoing geopolitical developments.