Oil held on to most of the gains it made over the previous two days, off speculation that the next OPEC+ meeting could result in deeper supply cuts this coming weekend.
Brent, the European global benchmark inched downward, reaching below $82 per barrel following a run of more than 6% of gains in the last two sessions, as West Texas Intermediate sat just under $78 per barrel. US oil options indicate that many traders are betting that at the next meeting of the Organization of Petroleum Exporting Countries and allied producers (OPEC+), the producers group will institute further output cuts in an effort to reverse the recent declines in prices.
On Wednesday, ahead of the producers group meeting, traders will get an update into the US market conditions as official figures on crude and refined product stockpiles, as well as gauges of demand will be released. For the past four weeks, crude inventories nationwide have been increasing, hitting the highest levels since August.
It has been a volatile ride for oil this quarter which began with the outbreak of the conflict between Israel and Hamas. In addition there have been signs that non-OPEC crude supplies are increasing, which has also hit prices, as production gains there offset the impact of the various reductions, both collective and voluntary, which OPEC and its allied nations, including Russia, have imposed.
RBC Capital Markets LLC analysts including Helima Croft said in a Nov. 20 note that with regard to OPEC+, “We see some scope for the group to do a deeper reduction,” and that although the most likely outcome would be for the group to maintain the existing production cuts, “it is hard to make binding calls on policy action given the leadership’s fondness for unpredictable outcomes.”
The conflict in the Mideast, between Hamas and Israel, showed signs of weakening, as Hamas announced it was close to reaching a “truce agreement” with Israel, which has been taken as a sign that there is progress in talks over the militant group releasing some of the hostages which it kidnapped during the October 7th surprise attack it launched on Israel. Meanwhile, however, the fighting in Gaza continues.
Analysts have noted that timespreads are suggestive of looser near-term balances. The two nearest contracts for both WTI and Brent have assumed a bearish contango structure, where longer dated futures contracts are trading at a premium to nearer ones, indicating a prevailing belief that prices have neared a bottom, and will go up in the future.
