Energy
Monday, November 20th, 2023 4:10 pm EDT
Key Points
- Oil Futures Surge: Oil futures experienced a significant increase of more than $1 on Monday. Brent crude futures rose by $1.78 to reach $82.39 per barrel, and U.S. West Texas Intermediate (WTI) crude increased by $1.71 to $77.60. The more active January futures for WTI gained $1.79 to reach $77.83.
- Prospect of OPEC+ Supply Cuts: The surge in oil prices was driven by the prospect of OPEC+ (Organization of the Petroleum Exporting Countries and allies, including Russia) considering additional supply cuts. This potential move comes in response to four weeks of declining prices fueled by concerns over global demand.
- Market Dynamics and Global Factors: Oil prices had experienced a nearly 20% drop since late September. The prompt inter-month spreads for both Brent and WTI had slipped into contango, signaling sufficient supply. The market observed a 4% increase in both Brent and WTI contracts on the previous Friday following reports that OPEC+ would discuss additional supply cuts in its meeting on November 26. Investors were also monitoring factors such as U.S. sanctions on Russian crude oil shipments and developments in Russian gasoline and diesel exports. Additionally, U.S. energy companies added oil and gas rigs for the first time in three weeks, and U.S. oil refiners were expected to have increased refining capacity. Meanwhile, geopolitical tensions in the Middle East, specifically the Gaza enclave, added to market uncertainties.
Oil futures experienced a more than $1 increase on Monday, with Brent crude futures rising by $1.78 to reach $82.39 per barrel, and U.S. West Texas Intermediate (WTI) crude up $1.71 at $77.60. The rise comes amid the potential for OPEC+ to deepen supply cuts in response to a four-week decline in prices driven by concerns over demand. Both Brent and WTI contracts settled 4% higher on the previous Friday following reports that OPEC+ is considering additional supply cuts during its meeting on November 26. Oil prices had experienced a nearly 20% drop since late September, and inter-month spreads for Brent and WTI entered contango last week, indicating sufficient supply. Analysts note that while additional cuts could lead to a short-term price boost, the longer-term impact is uncertain due to challenges related to enforcement and adherence.
Investors are also monitoring Russian crude oil trade following U.S. sanctions on three ships transporting Sokol crude to India. Moscow recently lifted a ban on gasoline exports, potentially increasing global motor fuel supplies. Additionally, U.S. energy companies added oil and gas rigs for the first time in three weeks, according to Baker Hughes. Meanwhile, U.S. oil refiners are expected to have 264,000 barrels per day of capacity offline for the week ending November 24, increasing available refining capacity by 559,000 bpd, as reported by IIR Energy. In the Middle East, there are indications that a deal to free hostages in the Gaza enclave may be nearing despite ongoing conflicts.
For the full original article on REUTERS, please click here: https://www.reuters.com/business/energy/oil-extends-gains-opec-mull-deeper-cuts-2023-11-20/
