Crude oil pulled back on Tuesday as investors remain cautious ahead OPEC+ meeting scheduled for Sunday.
Brent crude oil, against which Nigerian oil is priced, shed 0.6% to $81.81 a barrel, while U.S. West Texas Intermediate crude oil dropped 0.7% to $77.32 a barrel.
The retreat follows a 2% gain recorded on Monday after certain oil reports suggested that OPEC+, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, might contemplate additional oil supply cuts during the meeting.
However, short-term speculators taking profits and technical chart indicators signaling overbought conditions contributed to the pullback.
Market analysts are speculating on the potential outcomes of the OPEC+ meeting, with some predicting an extension or even deepening of oil supply cuts into 2024.
Helima Croft, an analyst at RBC Capital, suggests that while there may be room for a deeper reduction, Saudi Arabia could seek additional contributions from other members to share the adjustment burden.
Concerns over demand growth, especially from China, the world’s largest oil importer, and worries about a possible U.S. recession in 2024, contribute to the uncertainty in the oil market.
The recent warning from Walmart about potential deflation also adds to the cautious sentiment among traders.
Oil prices have experienced a 16% decline since late September, influenced by record-high crude output in the U.S. and concerns about global demand.
Traders are closely monitoring inventory reports with expectations that U.S. crude and gasoline stockpiles will increase while distillate inventories drop.
As the OPEC+ meeting approaches, the oil market remains sensitive to geopolitical developments and economic indicators, with investors navigating a complex landscape of supply and demand dynamics.
Oil Prices Stable Amid OPEC+ Anticipation and Global Economic Concerns
Oil prices remained relatively unchanged on Thursday as investors awaited the outcome of an eagerly anticipated OPEC+ meeting, which could potentially result in deeper supply cuts in 2024.
Brent crude oil increased by 70 cents to $83.80 a barrel, while U.S. West Texas Intermediate crude inched up by 55 cents to settle at $78.41 a barrel.
The OPEC+ group, comprising the Organization of Petroleum Exporting Countries and allies like Russia, is scheduled to conduct virtual meetings on Thursday to discuss additional production cuts, potentially ranging from 1 million to 2 million barrels per day in early 2024.
Implementing these additional cuts may lead to an immediate surge in prices, but their long-term impact is viewed skeptically by industry experts.
Tamas Varga, an oil broker at PVM, expressed doubt about compliance and suggested that the global oil balance might be less tight than OPEC estimates.
Factors such as the latest U.S. commercial inventory data, revealing an unexpected increase of 1.6 million barrels, and persistently high interest rates in major economies could dampen oil demand.
Despite the surprise build in U.S. crude oil stocks reported by the Energy Information Administration on Wednesday, oil prices remained resilient, with investors focused on the OPEC+ meeting.
Adding to concerns about the demand side, China’s economic challenges persist, highlighted by recent factory data indicating contraction for the second consecutive month in November.
This economic backdrop adds a layer of uncertainty to the oil market, as China is a significant player in global oil consumption.
Investors are closely monitoring the OPEC+ decisions, and the outcome is expected to influence short-term oil prices, although underlying economic challenges continue to cast shadows on the broader outlook for the industry.
Oil Prices Hold Steady Ahead of Crucial OPEC+ Meeting Amidst Fed Rate Hike Signals
Oil prices maintained their significant gains as traders anticipate the outcome of a crucial OPEC+ meeting on supply while considering signals from the Federal Reserve regarding interest rate policies.
Global benchmark Brent hovered below $82 a barrel, having surged over 2% on Tuesday, while West Texas Intermediate traded under $77.
The OPEC+ meeting, scheduled for Thursday to set policies for 2024, is currently grappling with a dispute over output quotas for some African members.
The recent rise in crude prices is underpinned by a weakening dollar, with a Bloomberg gauge of the US currency reaching its lowest level since August.
Federal Reserve policymakers, including Governor Christopher Waller, have hinted at an impending pause in the series of rate hikes, contributing to the bullish sentiment in oil markets.
A softer dollar enhances the appeal of commodities for international buyers.
Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore, commented on the interplay of factors, stating, “The US dollar was dragged lower on a build-up in dovish expectations, which was very much cheered on by oil prices.”
However, concerns persist about OPEC+’s ability to address the challenges in the oil market effectively.
Despite the recent gains, oil is on track for a consecutive monthly decline due to increased supply from non-OPEC countries, intensifying pressure on the cartel and its allies to consider more significant output cuts.
The International Energy Agency’s earlier assessment indicated a potential return to a global crude surplus in the coming year.
In the US, the American Petroleum Institute reported a 817,000-barrel decline in nationwide inventories last week, potentially marking the first drop in six weeks, pending confirmation from government data.
This development may add support to oil prices and impact the ongoing dynamics in the energy market.
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