Oil Edges Higher as Saudis Push OPEC+ to Trim Production Quotas

By Bloomberg

Nov 28, 2023

image is BloomburgMedia_S4RVMUT0AFB401_28-11-2023_05-00-09_638367264000000000.jpg

A drilling pipe operates at the rotary table on a drilling rig, operated by Tatneft PJSC, operates at night on an oilfield near Almetyevsk, Tatarstan, Russia, on Tuesday, March 6, 2019. Tatneft explores for, produces, refines, and markets crude oil. Photographer: Andrey Rudakov/Bloomberg

Oil edged higher after a string of losses as the market weighed the possibility of deeper output cuts from OPEC+ against signs global supply is running ahead of demand.

Brent crude traded above $80 a barrel, after a four-day streak of losses that saw futures erase 3%. West Texas Intermediate was near $75. OPEC+’s de-facto leader Saudi Arabia has asked other members to reduce their production quotas to shore up markets, although some members are resisting, delegates said.

“Oil bears should be careful not to underestimate Saudi’s resolve,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd. “But it will be hard for them to secure buy-in from all member states.”

  

Crude has dropped by around a fifth since late September due to plentiful supplies and concerns about the global economic backdrop, putting pressure on the 23-nation alliance to intervene at its online meeting on Thursday. The International Energy Agency warned earlier this month that markets would move back into surplus next year amid a dramatic slowdown in demand growth.

A Bloomberg survey of traders and analysts late last week showed around half of respondents expect OPEC+ to take further measures to tighten the market. If the alliance doesn’t announce an additional cut of about 1 million barrels a day on top of curbs from Saudi Arabia, prices could sink to the low $70s per barrel, according to analysts at Eurasia Group led by Raad Alkadiri.

Reflecting the weakness, hedge funds have turned increasingly bearish on crude. Money managers slashed combined net-long Brent and WTI positions to the lowest since late June, the latest weekly data from ICE Futures Europe and the CFTC running to Nov. 21 showed. Oil options skews have also been showing bearish put biases, while widely watched timespreads have also eased.

Elsewhere, a storm in the Black Sea halted loadings of commodities including crude from key ports in Russia and Ukraine. The storm is expected to last most of this week, according to Russia’s oil-pipeline operator Transneft PJSC.

©2023 Bloomberg L.P.

By Yongchang Chin

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