Oil was little changed Monday as traders weighed the OPEC+ alliance’s plan to pause its output revival next quarter on anticipation demand will slow, while the market is seen headed for oversupply.
West Texas Intermediate rose about 0.1% to settle above $61 a barrel after fluctuating between small gains and losses through the day, extending a string of marginal increases. The Organization of the Petroleum Exporting Countries and its partners said the decision on Sunday to halt production hikes from January reflects an expectation for a seasonal slowdown. The move comes against a backdrop of widespread forecasts for excess supplies next year that could weigh down prices.
The US benchmark has slumped about 9% over the past three months as OPEC+ ramped up output in an apparent effort to regain market share, while producers outside the group also increased production. Prices recently bounced from a five-month low after tighter US sanctions on two major Russian oil producers over the war in Ukraine raised some questions about supply from Moscow.
“The decision to halt quota hikes during 1Q does not materially change our production forecasts but still sends an important signal,” Morgan Stanley analysts including Martijn Rats and Charlotte Firkins wrote. “The group is still adjusting supply in response to market conditions.”
The eight key members of OPEC+ are left with roughly 1.2 million barrels a day of their current supply tranche still to restore. Actual output increases have fallen short of advertised volumes, as some members offset earlier overproduction and others struggle to pump more.
Following the OPEC+ move, Morgan Stanley raised its near-term price forecast for Brent while also maintaining a warning for a “substantial surplus.” The United Arab Emirates, meanwhile, on Monday added to the chorus of producers who have come out to downplay glut concerns.
Traders will also be monitoring disruptions to flows after a Ukrainian drone attack in the Black Sea left a tanker ablaze and damaged loading facilities in the port city of Tuapse. Oil intake at the refinery at Tuapse halted after the attack, according to a person familiar with the matter.
At the same time, top energy producers warned at the Adipec conference in Abu Dhabi that supply will be hit by the latest set of sanctions on Russia. The restrictions are serious and dampening supply, said BP Plc boss Murray Auchincloss.
Oil Prices
WTI for December delivery rose 0.11% to settle at $61.05 a barrel in New York.
Brent for January settlement fell 0.19% to settle at $64.89 a barrel.
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