Oil prices rose nearly 1% on Monday after OPEC+’s planned November production increase was more modest than expected, easing concerns about supply increases. However, analysts say refinery maintenance will limit oil demand in Q4, and the weak Q4 demand outlook will also limit short-term gains.
Brent crude futures rose 67 cents, or 1%, to $65.2 a barrel by 06:25 GMT, while WTI crude was up 66 cents, or 1.1%, at $61.54.
The rise in prices came after OPEC+ announced a lower-than-expected production increase next month to offset the recent decline in oil markets. This represents the same modest monthly increase as in October.
Ahead of the meeting, sources indicated that Russia advocated for a 137,000 bpd increase to avoid suppressing prices, but Saudi Arabia would prefer to double, triple, or even quadruple this figure to regain market share more quickly.
Some analysts predict that the upcoming refinery maintenance season in the Middle East will help stabilize prices in the near term.
Higher-than-normal refinery maintenance across the Middle East in Q4 will ensure more crude is available for shipment and further contribute to the expectation of strong export volumes.
Other refineries may also limit oil purchases during their closures. The increase in refinery maintenance could create a significant surplus, triggering a sell-off in oil prices.
Expectations of weak demand fundamentals in the fourth quarter are another factor limiting the market’s upside potential.
With the absence of a new upward catalyst and increasing uncertainty about the demand outlook, oil prices are likely to remain capped despite OPEC+’s lower-than-anticipated production increase.
The market is slowly shifting towards an oversupply phase, with seasonal demand expected to taper off towards winter and macro data offering little upward momentum.