Prices fell on Friday as the release of some hostages in Gaza by Hamas reduced the geopolitical risk premium. However, oil rose in the first week of more than a month, heading for its first weekly gain in five weeks, ahead of OPEC+’s meeting next week to decide on production cuts in 2024.
Brent crude futures were down 84 cents, or 1%, at $80.58 a barrel, while West Texas Intermediate crude (WTI) was down $1.56, or 2%, from Wednesday’s $75.54. No settlement happened on WTI on Thursday due to the US Thanksgiving holiday.
The four-day ceasefire period, during which more hostage exchanges are planned to take place, continues. This is important in terms of reducing the risk premium.
Both contracts posted their first weekly gains in five weeks as OPEC+ prepares for a meeting where production cuts will be high on the agenda following recent declines in oil prices due to demand concerns and increased supply, particularly from non-OPEC producers.
The OPEC+ group, consisting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, created a surprise in the market by postponing Wednesday’s meeting to November 30 after producers had difficulty reaching an agreement on production levels.
The surprise meeting date postponement initially caused Brent futures to fall as much as 4% and WTI futures to fall as much as 5% in Wednesday’s trading ahead of the US Thanksgiving holiday.
Meanwhile, some OPEC+ sources said that OPEC+ is close to reaching an agreement with African oil producers on 2024 production levels. The main meeting on Thursday may provide some relief to investors. The most likely outcome at the moment appears to be an extension of the current cuts.
A bright spot has emerged for the near-term economic outlook in China. It is thought that the latest Chinese data and new aid to the indebted real estate sector may be positive for the near-term trend of the oil market.
But those gains could be limited by high U.S. crude inventories and weak refining margins, which could lead to weakening demand from U.S. refineries, analysts said. Fundamental developments are to the downside, with US oil inventories rising.
Yet China’s long-term outlook remains moderate. Analysts say oil demand growth could weaken to around 4% in the first half of 2024 as the real estate crisis weighs on diesel use.
Non-OPEC production growth is expected to remain strong. Brazilian state energy company Petrobras, for example, plans to invest $102 billion over the next five years to increase production from 2.8 million barrels per day to 3.2 million barrels of oil equivalent per da