By Florence Tan
In Singapore, oil futures saw a slight uptick on Monday as the market believed OPEC+ would deepen supply cuts to support prices. This comes after a four-week decline in prices due to easing concerns over supply disruption from the Israel-Hamas conflict in the Middle East.
At 0012 GMT, Brent crude futures increased by 0.1% to reach $80.72 a barrel, while U.S. West Texas Intermediate crude stood at $75.97 a barrel, up 8 cents. The front-month December contract is set to expire later today, with the more active January futures gaining 13 cents, or 0.2%, reaching $76.17 a barrel.
Friday saw both contracts settling 4% higher after the news from three OPEC+ sources that the producer group, comprising OPEC and Russia, will deliberate on whether to implement additional oil supply cuts at its Nov. 26 meeting.
Since late September, oil prices have fallen by nearly 20%, and last week saw prompt inter-month spreads for Brent and WTI slipping into contango. In a contango market, prompt prices fall below future month prices, signaling adequate supply.
According to Goldman Sachs analysts, the statistical model of OPEC decisions indicates that deeper cuts cannot be discounted, given the decrease in speculative positioning and timespreads, as well as higher-than-expected inventories.
The bank’s baseline forecast suggests that existing group production cuts will remain in place until 2024. Additionally, Saudi Arabia’s unilateral cut of 1 million barrels per day is expected to be extended through the second quarter of next year and gradually reversed from July.
IG analyst Tony Sycamore believes that WTI prices could surge toward $80 a barrel if OPEC+ announces deeper cuts at their upcoming meeting. However, if prices drop below $72, the Biden administration may decide to refill 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 also monitoring the disruption in Russian crude oil trade after Washington imposed sanctions on three ships that have supplied Sokol crude to India. Furthermore, Moscow recently lifted a ban on gasoline exports, potentially increasing global supplies of the motor fuel.
In the Middle East, U.S. and Israeli officials reported that a deal to free some hostages in Gaza was nearing despite ongoing fighting.
(Reporting by Florence Tan; Editing by Christopher Cushing)
