Oil prices experienced a decline on Monday, with Brent approaching the $80 per barrel mark, as investors eagerly anticipated the upcoming OPEC+ meeting later in the week to reach an agreement on supply cuts extending into 2024.
Brent crude futures saw a decrease of 37 cents, equivalent to 0.5%, settling at $80.21 per barrel by 0231 GMT. Simultaneously, U.S. West Texas Intermediate crude futures stood at $75.18 per barrel, reflecting a 0.5% drop or 36 cents.
Both contracts recorded a slight increase in the previous week, marking their first weekly gain in five weeks.
This positive trend was influenced by the anticipation that Saudi Arabia and Russia might prolong voluntary supply cuts into early 2024, and discussions within OPEC+ regarding further reduction plans.
Oil prices experienced a decline in the middle of the preceding week when the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, postponed a ministerial meeting to November 30 to resolve disparities on production targets for African producers.
Sources within OPEC+ indicated on Friday that the group has moved closer to reaching a compromise.
Despite the potential for a positive outcome, ING analysts noted that market sentiment remains negative due to the ongoing dispute within OPEC+ over production quotas.
They anticipate Saudi Arabia to extend its additional voluntary cut of 1 million barrels per day into the following year, expressing concern that the absence of such a move could exert further downward pressure on the market.
In anticipation of the OPEC+ meeting, estimated exports by OPEC countries have decreased to 1.3 million barrels per day below April levels, according to Goldman Sachs analysts.
The bank anticipates an extension of the unilateral cuts by Saudi Arabia and Russia through at least the first quarter of 2024, along with unchanged group cuts. However, the possibility of a deeper group insurance cut is also being considered.
Meanwhile, the United Arab Emirates plans to increase exports of its flagship Murban crude early next year under a new OPEC+ mandate. This shift is attributed to barrels being diverted to the international market due to refinery maintenance.
The International Energy Agency (IEA) predicts a slight surplus in global oil markets in 2024, even if OPEC+ nations extend their cuts into the next year.
Commonwealth Bank analyst Vivek Dhar emphasized that OPEC+ must exhibit significant supply discipline, or at least convey the ability to do so, to alleviate concerns about a deep surplus in oil markets in the coming year, especially with the IEA forecasting a lower growth in global oil demand for 2024 compared to 2023.
Furthermore, oil prices have stabilized following a reduction in geopolitical tensions in the Middle East, marked by a ceasefire in Gaza and an exchange of hostages and prisoners.
