Oil Futures Advance After OPEC+ Move
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Crude oil futures advanced after OPEC+ decided to delay an output hike by one month, George Pavel, General Manager at Naga.com Middle East, said in a market analysis sent to Rigzone on Monday.
“This move extends the existing output cut of 2.2 million barrels into December, responding to falling prices and weak demand,” Pavel noted.
“This delay may reflect OPEC+’s commitment to supporting prices more than expected, which could create a near-term bullish outlook for global crude prices,” he added.
“By maintaining tighter supply in the market, OPEC+ may help stabilize prices and encourage upward price momentum,” Pavel went on to state.
In the analysis, Pavel warned that, while recent price increases suggest bullish sentiment, there is caution about the sustainability of this trend.
“Risks of oversupply remain, raising doubts about continued gains,” he said.
“However, the Middle East situation, particularly the risk of potential Iranian actions against Israel, could impact market sentiment, further supporting the recent rebound in global crude prices,” he noted.
“In addition, several key events on the horizon, such as the U.S. presidential election and important economic meetings in China, could create some volatility in the market,” Pavel went on to state.
In a separate market analysis sent to Rigzone on Monday, Antonio Di Giacomo, a Senior Market Analyst at XS.com, highlighted that West Texas Intermediate (WTI) crude oil prices “significantly increased by more than two percent, reaching approximately $70.60 per barrel during the Asian market session”.
Di Giacomo noted in the analysis that this price rise was “mainly due to OPEC+’s decision to delay the planned production increase for December by at least one month”.
“The group’s decision aims to stabilize prices amid growing market pressures, influenced by a combination of both external and internal factors in the economies of the central consumer and producer countries,” he added.
In the analysis, Di Giacomo said one of the factors impacting prices is the weak global demand for crude oil, particularly from China, which he pointed out is currently experiencing an economic slowdown.
“This reduction in the Chinese market is driven by internal factors and a series of structural issues that have affected its capacity to consume crude oil in recent months,” Di Giacomo said.
“Additionally, increased production from non-OPEC+ countries has added significant pressure on the market, forcing cartel member countries to reconsider their production policies,” he added.
Di Giacomo also highlighted in the analysis that the weakness of the U.S. dollar has played a key role in the rise in oil prices.
“The volatility of the U.S. currency, exacerbated by uncertainty surrounding the upcoming U.S. elections, directly affects the cost of crude oil, given that oil is priced in dollars,” he said.
“The dollar depreciation tends to make crude oil more affordable for international buyers, increasing demand and, consequently, prices,” he added.
In the analysis, Di Giacomo also noted that the Chinese economy could benefit from potential government stimulus, which he said represented another positive factor for crude prices, and pointed out that U.S. energy policy will impact crude oil prices.
“Both presidential candidates have expressed their intent to increase domestic oil production. This policy, however, could lead to an increase in the global crude oil supply, affecting market dynamics and potentially slowing the rise in prices over the long term,” he said.
“In combination with OPEC+ strategies, U.S. energy policies will be crucial factors for balance in the oil market,” he highlighted.
Di Giacomo stated in the analysis that, in the short term, OPEC+’s delay in production increases and potential economic stimulus in China could sustain higher prices. He added, however, that the U.S. elections and future energy policies could introduce new variables to the market, influencing oil price growth prospects in the coming months.
In a report sent to Rigzone today, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), highlighted that OPEC+ will not lift production by 180,000 barrels per day in December as planned, describing the move as “an effort to prevent the oil price from sliding lower”.
“U.S. crude oil production is at the same time ticking up by 38,000 barrels per day per month in September and the growth pace looks like it is ticking higher by the month as new U.S. shale oil production is growing faster than losses in existing production,” he added.
“U.S. crude oil reached a new, all-time high of 13.4 million barrels per day in August. The U.S. is not making it easy for OPEC+. The group is trying to tell the U.S. – ‘slow your growth, because we need to produce more’,” he continued.
A statement posted on OPEC’s website on Sunday revealed that Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman had extended voluntary cuts of 2.2 million barrels per day for one month until the end of December this year.
“In addition, the eight countries reiterated their collective commitment to achieve full conformity with the Declaration of Cooperation, including the additional voluntary production adjustments that were agreed to be monitored by the JMMC during its 53rd meeting held on April 3rd 2024, and to fully compensate by September 2025 for the overproduced volumes since January 2024 in accordance with the compensation plans submitted to the OPEC Secretariat,” the statement added.
“The countries also noted the recent announcement made by Iraq and the joint statement made by Russia and Kazakhstan, in which they strongly reaffirmed their commitment to the agreement including the additional voluntary production adjustments and to their compensation schedules for the overproduced volumes since January 2024,” it continued.
by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas