NEW YORK: Oil prices rebounded from early losses on Monday (Nov 21) after Saudi Arabia denied a report it was discussing an increase in oil supply with Opec and its allies.
Brent crude futures for January settled at US$87.45 (RM400.08), shedding 17 cents. US West Texas Intermediate (WTI) crude futures for December settled at US$79.73 (RM364.76) a barrel, falling 35 cents ahead of the contract’s expiry later on Monday.
The more active January contract was down 7 cents at US$80.04 a barrel.
Both benchmarks had plunged by more than US$5 a barrel early, hitting 10-month lows, after The Wall Street Journal reported an increase of up to 500,000 barrels per day will be considered at the Opec+ meeting on Dec 4.
Oil then retraced its losses after Saudi Arabian energy minister Prince Abdulaziz bin Salman said the kingdom is sticking with output cuts and not discussing a potential oil output increase with other Opec oil producers, state news agency SPA reported, denying the Journal report.
“It turned the whole situation upside down in a matter of minutes,” said John Kilduff, partner at Again Capital LLC here. “The Saudis giveth and then they taketh away.”
The Organization of the Petroleum Exporting Countries (Opec) and its allies, together known as Opec+, recently cut production targets and the energy minister of de facto leader Saudi Arabia was quoted this month as saying the group will remain cautious.
Releasing more oil amid weak Chinese fuel demand and US dollar strength would have moved the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, said Bob Yawger, director of energy futures at Mizuho here. “That’s playing with fire.”
Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.
The dollar rose 0.9% against the Japanese currency to ¥141.665, on pace for its largest one-day gain since Oct 14.
“Apart from the weakened demand outlook due to China’s Covid curbs, a rebound in the US dollar today is also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.
“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and eurozone,” she said, adding that hawkish comments from the US Federal Reserve last week also sparked concerns over the US economic outlook.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns. – Reuters
