Oil Holds Two-Day Advance on Speculation OPEC+ May Deepen Curbs

By Bloomberg

Nov 21, 2023

image is BloomburgMedia_S4G2M0T1UM0W01_21-11-2023_05-00-15_638361216000000000.jpg

An autorickshaw drives past an oil refinery operated by Hindustan Petroleum Corp., in Mumbai, India, on Tuesday, Oct. 3, 2023. Oil prices need to fall to levels of around $80 a barrel to be good for consumers, India’s Oil Minister Hardeep Puri said, adding that the third largest consumer in the world will continue to buy where it finds the best prices. Photographer: Dhiraj Singh/Bloomberg

(Bloomberg) -- Oil held the bulk of a two-day gain that was driven by speculation OPEC+ may deepen supply cuts at a meeting this weekend.

Global benchmark Brent eased below $82 a barrel after rising more than 6% over the prior two sessions, while West Texas Intermediate was below $78. US oil options point to many traders betting that the producers’ group is poised to add to output curbs in a bid to reverse a recent slide in prices.

Saudi Arabia is likely to keep its voluntary supply cut of 1 million barrels a day into the new year says Ellen Wald, senior fellow at the Atlantic Council. She talks on “Bloomberg Markets.”Source: Bloomberg

Ahead of the cartel’s meeting, traders will get fresh insights into US market conditions with the release of official figures on crude and product stockpiles, as well as gauges of demand on Wednesday. Nationwide crude inventories have expanded for the past four weeks to hit the highest since August.

Oil has had a bumpy ride this quarter, rocked initially by the outbreak of the war between Hamas and Israel. Indications that non-OPEC crude supplies are expanding have also buffeted prices, with the gains in production offsetting the impact of collective and voluntary reductions agreed by the Organization of Petroleum Exporting Countries and its allies including Russia.

“We see some scope for the group to do a deeper reduction,” RBC Capital Markets LLC analysts including Helima Croft said in a Nov. 20 note, referring to OPEC+. Although the group is broadly expected to maintain the existing supply reductions, “it is hard to make binding calls on policy action given the leadership’s fondness for unpredictable outcomes.”

In the Middle East, Hamas — designated a terrorist organization by the US and European Union — said it was close to reaching a “truce agreement” in talks with Qatar and Israel, in a sign that suggests discussions over freeing some hostages held by the militant group are progressing. Even with those discussions ongoing, the fighting in Gaza rages on.

Timespreads, meanwhile, suggest looser near-term balances. The gap between the two nearest contracts for both Brent and WTI are in a bearish contango structure, when longer-dated futures trade at a premium to nearer ones.

By Yongchang Chin