Crude oil bounces as further OPEC+ production cuts said to be on the table (NYSEARCA:USO)
Crude oil rebounded Friday from four-month lows hit in the previous session, as traders see a growing likelihood that OPEC and its allies will work to stop the nearly 20% plunge in prices since late September.
Reuters and Financial Times both reported that OPEC+ is expected to consider whether to make additional oil supply cuts when the group meets later this month.
Saudi Arabia, Russia and other OPEC+ members already have pledged total cuts of more than 5.1M bbl/day, or ~5% of daily global demand, in a series of steps that started late last year, but Reuters reported at least one unnamed OPEC+ source believes the existing curbs might be not enough and the group likely will study whether more could be implemented when it meets starting November 26.
OPEC+ members also are angry about Israel’s war on Hamas and the humanitarian crisis in Gaza, according to Financial Times, which reported additional cuts of as much as 1M bbl/day could be on the table.
While no repeat of the 1970s oil shock is planned, “you should not underestimate the level of anger there is and the pressure leaders in the Gulf feel from their populations to be seen to respond in some manner,” a source told FT.
Front-month Nymex crude (CL1:COM) for December delivery was +4.1% on Friday but fell 1.6% for the week to $75.89/bbl, while front-month December Brent crude (CO1:COM) also closed +4.1% on Friday but ended the week down 1% to $80.61/bbl.
Both benchmarks were slammed a day earlier, falling nearly 5% for their lowest settlements since July 6 and their largest one-day dollar and percentage declines since October.
Goldman Sachs analysts said this week it expects OPEC+ will keep a floor under the crude oil price next year.
“We believe OPEC will ensure that Brent oil prices end up in a $80-$100 range in 2024 by ensuring a moderate deficit and leveraging its pricing power,” Goldman analysts including Daan Struyven said.
Other analysts including Energy Aspects expect Saudi Arabia to maintain its 1M bbl/day voluntary cut to at least next year’s Q1.