Oil futures rose on Monday. OPEC+’s concerns about supply disruptions in the Middle East due to the Israel-Hamas conflict eased, and expectations that supply cuts would deepen to support prices that have been falling for four weeks extended the gains.
Brent crude futures were up 57 cents, or 0.7%, at $81.18 a barrel by 04:00 GMT, while West Texas Intermediate crude (WTI) was up 51 cents, or 0.7%, at $76.40 a barrel. The front-month December contract expired later Monday, while the more active January futures rose 55 cents, or 0.7%, to $76.59 a barrel.
Both contracts rose 4% on Friday after sources said the producer group (OPEC+), made up of the Organization of the Petroleum Exporting Countries and their allies including Russia, will consider whether to cut additional oil supplies at its meeting on November 26.
Oil prices have fallen almost 20% since late September, while Brent and WTI inter-month spreads fell into contango last week. Short-term prices are lower in the contango market than in the coming months, signaling sufficient supply.
Deeper cuts should not be ruled out, given the decline in time frames for OPEC decisions and higher-than-expected inventories.
On the whole, current group production cuts are likely to continue in full in 2024, with Saudi Arabia’s unilateral cut of 1 million barrels per day extended until the second quarter of next year and gradually reversed from July onwards.
While WTI prices are expected to rise to $80 per barrel, driven by the possibility of OPEC+ announcing deeper cuts at its upcoming meeting, a drop below $72 could encourage the Biden administration to refill the US Strategic Petroleum Reserve.
All this shows that a recovery in prices is likely in the first half of this week.
Investors also expect a deterioration in Russian crude oil trade after Washington imposed sanctions on three ships sending crude oil to India.
Moscow on Friday lifted a ban on gasoline exports that could increase global motor fuel supplies. This comes after Russia lifted most restrictions on diesel exports last month.
As a positive development in the Middle East, US and Israeli officials said that despite the violent clashes, an agreement was reached to release some of the hostages held in the besieged Gaza region.
U.S. energy firms added oil and gas rigs last week for the first time in three weeks, energy services company Baker Hughes said Friday, with the oil and gas rig count an early indicator of future production.