HOUSTON: Oil prices climbed more than 2% on Monday (Nov 20) as further supply cuts in Opec+ production are expected to be announced following a meeting of member countries early next week.
Brent crude futures settled up US$1.71, or 2.1%, at US$82.32 (RM384.64) a barrel.
The front-month December West Texas Intermediate crude (WTI) expired at US$77.60 (RM362.58), up US$1.71, or 2.3%. The more active January futures gained US$2.39 to US$77.83 (RM363.66), up 1.8%.
Both benchmarks have plunged for four straight weeks, but started to rebound on Friday, settling 4% higher on profit-taking and after three Opec+ sources told Reuters that the producer group, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, is set to consider whether to make additional supply cuts when it meets on Nov 26.
“The Opec commentary signalling further cuts came right on cue,” said John Kilduff, partner with Again Capital LLC. “I would expect any cut would be modest. The Saudis have cut so much production, I don’t know how much more they can do.”
Goldman Sachs said that based on its statistical model of Opec decisions, deeper cuts should not be ruled out given the fall in speculative positioning and in timespreads, and higher-than-expected inventories.
Oil prices have dropped almost 20% since late September as crude output in the US, the world’s top producer, held at record highs, while the market was concerned about demand growth, especially from China, the No. 1 importer of oil.
Last week, inter-month spreads for Brent and WTI slipped into contango, where prompt barrels are cheaper than those in future months, signalling ample supply.
Traders were also watching for signs of demand destruction from a possible US recession in 2024 and also considering last week's warning about possible deflation from Walmart, the largest US retailer.
But most of all, traders were waiting for the Opec+ meeting set for Sunday. – Reuters