On Wednesday, oil fell on a report that the weekend meeting of the Organization of the Petroleum Exporting Countries and allied producers, including Russia (OPEC+) would be delayed.
According to report in Bloomberg, delegate sources are saying the November 26th meeting of the OPEC+ ministers has been delayed on account of Saudi Arabia being dissatisfied with the production output levels of other members.
The length of the delay remains unspecified, according to the anonymous delegates, who said Saudi representatives have been in talks with other oil producers over their output levels.
According to hedge fund manager Pierre Andurand, who spoke to Bloomberg earlier on Wednesday, it would appears the Saudis are looking to persuade other members to make more cuts.
Early on Wednesday, Brent crude had dropped as low as $78.50, before recovering some of its losses by its close at $81.50, as the market waited on the weekly US inventory report from the EIA. The report showed US inventories were up by 8.7 million barrels in the week to November 17th, rising to 448.1 million barrels. Analysts had forecast a 1.2 million barrel rise.
There is increasing speculation that OPEC’s top producer, Saudi Arabia intends to extend its voluntary production output cut of 1 million barrels per day (bpd) into 2024, due to the latest decrease in oil prices, which are hovering around $80, and the fact that oil demand is typically weak in the first quarter of the year.
There is also increasing chatter speculating that the cartel could decide to make even deeper cuts now to create a short-term support for prices at the coming meeting, whenever it is scheduled.
On Monday, ING strategists Warren Patterson and Ewa Manthey wrote in a note that the recent weakness in crude pricing “has increased noise over what OPEC+ will decide to do at its meeting on 26 November. We continue to expect that Saudi Arabia and Russia will roll over their additional voluntary cuts into early 2024.”
They added, “However, what is less clear is whether the broader OPEC+ group will make further cuts.”
The strategists noted that if the Saudis and Russia maintained their current production output cuts into the new year, and the cartel implemented a deeper group cut, that could eliminate the currently expected market surplus for the first quarter of 2024.
