Oil prices in the international markets continued their lower slide on Monday, with Brent crude falling towards $80/barrel ahead of a much awaited OPEC+ meeting later this week.
Brent crude futures plummeted 0.5% or 37 cents to reach $80.21 a barrel, while US West Texas Intermediate (WTI) crude futures went down by 0.5% or 36 cents to $75.18/ barrel.
Both the benchmarks rose slightly in the past week, their first weekly gain since mid-October based on the expectations that Russia and Saudi Arabia would reverse the voluntary supply cuts decision in early 2024 and might decide on further reducing it.
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Crude in the Last Week
Prices started falling in the middle of last week after OPEC+ nations postponed a ministerial level meeting that was scheduled to be held on November 30 to settle the differences on production plans for African producers.
Analysts are of the view that markets are in a negative sentiment given the internal strife within the oil producing nations group (OPEC+) over fixing producing quotas. However, the markets are also weighing this possibility that Saudi Arabia might roll over its decision to voluntarily reduce oil production of 1 million barrels a day by next year.
Since then the group has also been closer to a negotiation than in the past couple of weeks, as per Reuters.
“Clearly, if we do not see this, it would put further downward pressure on the market, given the surplus in the first quarter of 2024,” an ING analyst reported. This might also lead the Brent crude oil to slide down further than current levels of $80/barrel
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The Way Ahead
Goldman Sachs in its note mentioned that the crude oil exports is estimated to have declined by 1.3 million barrels a day since voluntary cuts were imposed, below the levels seen in April. The bank added that they still expect an extension of the unilateral cuts placed by Russia and Saudi at least till the first quarter.
However the UAE is set to jack up the exports of flagship Murban crude by next year as a new OPEC+ mandate is coming in and barrels of oil are being diverted to international markets for refinery maintenance.
The International Energy Agency also expects a minor surplus in the oil markets globally in 2023 even if the OPEC+ nations continued with their voluntary production cuts.
Vivek Dhar, a Commonwealth Bank analyst said “With the IEA forecasting that global oil demand will grow only by 0.9 million bpd next year, down from 2.4 million bpd growth in 2023; OPEC+ countries will have to show a major supply discipline, or at least jawbone ability, to alleviate market worries of a deep surplus in oil markets next year.”
Moreover, the oil prices have also stabilized after a temporary ceasefire was achieved in Gaza, bringing down the tensions to the controllable levels in the Middle East.
