Oil prices strengthened their rebound Monday afternoon as investors assessed the outcome of last weekend’s OPEC+ meeting.
Futures on Brent crude oil for August at London’s ICE Futures Exchange rose by $1.37 (1.8%) to $77.5 per barrel by 2:24 pm.
WTI July futures traded on the NYMEX rose by $1.37 (1.91%) to $73.11 per barrel by that time.
Last Friday, Brent gained 2.5% and WTI gained 2.3%.
OPEC+ countries at a meeting in Vienna on June 4 decided to reduce oil production quotas by another 1.4 mln bpd – to 40.46 mln bpd. The states voluntarily reducing production since May by 1.66 million bpd will extend the cuts for the entire year 2024.
Meanwhile, Saudi Arabia will reduce production by an additional 1 million b/d as early as this year and will think about a possible extension of such measure every month depending on the market situation to stabilize it.
“Saudi Arabia is more active than most other OPEC members in seeking to maintain oil prices above the $80 a barrel mark because it is important to the country’s budget balance for this year,” DBS Bank analyst Survo Sarkar wrote.
Rystad Energy, a consultancy, estimates that additional production cuts by the kingdom will increase the global market deficit to 3 million bpd in July, which will support prices in the coming weeks.
OPEC in its monthly report slightly increased its estimate of oil demand in 2021 and 2022 – by 70 thousand and 30 thousand bpd, respectively, that is, the estimate of oil consumption growth in 2022 remained almost unchanged – 2.5 million bpd, to 99.58 million bpd.
According to the paper, the historical oil demand data for the fourth quarter of 2022 in the OECD countries of America and Europe were slightly lowered, while in the OECD countries of the Asia-Pacific region – slightly higher. “Similarly, oil demand in non-OECD states is revised upward due to improved economic activity in some countries and a recovery in oil demand in China following the abandonment of the COVID-19 zero distribution policy,” OPEC experts said.
The forecast of growth in global oil demand in 2023 remains largely unchanged from last month’s estimate of 2.3 million bpd, to 101.9 million bpd.
At the same time, OPEC slightly raised its forecasts in the first three quarters of 2023 and lowered it in the fourth: in Q1 2023, the forecast was raised by 20,000 bpd to 101.28 million bpd, in Q2 the estimate was raised by 70,000 bpd to 100.77 million bpd, in Q3 by 150,000 bpd to 102.14 million bpd, and in Q4 was lowered by 120,000 bpd to 103.39 million bpd.
“Oil demand growth is adjusted downward in Q1 2023 and Q2 2023 to account for the expected decline in the OECD region due to the projected slowdown in economic activity in the OECD Americas and Europe. On the other hand, non-OECD oil demand is revised upward due to improved economic activity in China following the repeal of the COVID-19 zero-distribution policy, as well as an expected improvement in oil demand in Russia,” the report said.
Preliminary data for January 2023 show that commercial oil inventories in OECD countries rose by 34.9 million barrels to 2.8 billion barrels, 147 million barrels higher than at the same time a year ago, but 75 million barrels lower than the average for the past five years and 124 million barrels below the 2015-2019 average. Meanwhile, oil inventories rose 10.5 million barrels in January. – to 1.372 billion barrels (59 million barrels lower than the 2015-2019 average) and petroleum products rose 24.5 million barrels to 1.43 billion barrels (65 million barrels lower than the 2015-2019 average).
The price of March futures on London’s ICE Futures Exchange stood at $86.28 per barrel by 7:10 a.m., down $0.38 (0.44%) from the close of the previous session. At the close of trading last Friday those contracts fell by $0.81 (0.9%) to $86.66 per barrel.
The price of WTI futures for March at electronic trades of the New York Mercantile Exchange (NYMEX) is $79.31 per barrel by that time, which is $0.37 (0.46%) below the final value of the previous session. The contract fell by $1.33 (1.6%) to $79.68 per barrel at the end of last session.
Brent was down 1.1% and WTI, down 2.4% at the end of last week.
“Oil traders are locking in profits at the end of the month and taking a wait-and-see attitude ahead of OPEC+ and Federal Reserve meetings, the outcome of which will be known on February 1, and ahead of the entry into force of the EU ban on the import of Russian oil products on February 5,” said Phil Flynn, senior market analyst at The Price Futures Group.
Meanwhile, the number of active oil rigs in the U.S. fell four units to 609 last week, oil services company Baker Hughes said. The number of gas rigs increased by the same number to 160.
OPEC+ ministers, in their uncertainty related to the prospects of the world economy and the oil market, due to the need to improve long-term forecasts of the oil market, as well as in accordance with the successful approach to renewal actions, which were consistently applied by the participating countries, adopted a number of decisions, the secretariat of the organization reported.
All is provided, the term of the agreement has been extended until December 31, 2023.
Since November, the oil production quota has been reduced by 2 million b/s compared to the August level (falling in line with the October quotas).
Ministries are responsible for registration with the Office+ Ministerial Monitoring Committee (JMMC) and one at a time. Full-length OPEC+ ministerial meetings will be held this year together with OPEC+ conferences
JMMC may at any time request to the OPEC+ Ministries, if necessary.
The next meeting of OPEC+ ministers is scheduled for December 4.
Refund period for late date March 31, 2023.
Oil prices rise on Monday ahead of the OPEC+ meeting, traders are assessing the possibility of cutting production after recent statements by Saudi Energy Minister Prince Abdulaziz bin Salman about the possibility of such a move.
Most experts still believe that OPEC + will not reduce the oil production plan for October, Bloomberg notes. JPMorgan analysts explain this opinion by the fact that the summer surplus of raw materials in the world market can quickly turn into a deficit.
The price of November futures for Brent oil on the London ICE Futures exchange by 8:15 pm on Monday is $95.06 per barrel, which is $2.04 (2.19) higher than the closing price of the previous session. As a result of trading on Friday, these contracts rose by $0.66 (0.7%) to $93.02 per barrel.
The price of futures for WTI oil for October in the electronic trading of the New York Mercantile Exchange (NYMEX) is $88.66 per barrel by this time, which is $1.79 (2.06%) higher than the final value of the previous session. By the close of the market on Friday, the value of these contracts increased by $0.26 (0.3%) to $86.87 per barrel.
As a result of the past week, Brent fell by 6.1%, WTI – by 4.6%.
In Europe, the energy crisis is intensifying against the background of the suspension of Russian gas supplies via the Nord Stream gas pipeline. On Friday evening, Gazprom reported that the maintenance of the only working turbine of the Nord Stream revealed “gross violations” and the gas pipeline would not work without their elimination.
Shortly before this, the G7 countries approved a plan to introduce a price ceiling for oil exported by Russia. To implement this plan, the G7 countries intend, in particular, to ban insurance of tankers with Russian oil if it is sold at a price above a certain limit.
“We believe that Gazprom’s decision to extend the shutdown of Nord Stream supplies from the originally announced three days indefinitely is inextricably linked to the G7’s adoption of the price cap plan,” said James Whistler, managing director of Vanir Global Markets Pte. Bloomberg.
Although the G7 countries are striving to maintain the supply of Russian energy resources to the world market, while reducing Russia’s income, “in reality, everything happens the other way around,” the expert says.
