Oil slipped in a choppy day of trading as OPEC+ considers boosting the pace of future output hikes.
West Texas Intermediate fell 1.7% to settle near $62 a barrel. The OPEC+ alliance meets on Sunday and is considering stepping up supply increases. The group will discuss potentially lifting output by 500,000 barrels a day per month over a three-month period, a delegate said.
OPEC+ would be adding barrels to a market that major forecasters say doesn’t need them. The International Energy Agency says global oil markets are set for a record oversupply next year, while French oil giant TotalEnergies SE published figures on Monday that showed a significant crude surplus in the first quarter of next year.
Adding to the bearish sentiment, US crude oil production surpassed 13.6 million barrels a day for the first time ever in July, higher than previously expected.
“Our balance sheet clearly suggests additional supply isn’t needed,” ING Groep NV analysts including Warren Patterson wrote in a note. “We expect the market to move into a large surplus in the fourth quarter and remain in surplus through 2026.”
Still, some investors are skeptical that the prospective OPEC+ hike will materialize and that the amount that ultimately reaches the global market will be equivalent to the headline figure of its output plan.
“Once the market digests that, it may view this as a clearing event — there are no unwinds after this,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “My sense is this ties into the ongoing quota discussions within OPEC, with countries pushing for increases while Saudi Arabia remains reluctant given capacity and investment constraints.”
Further limiting the slide, Russia banned diesel exports for some companies and extended restrictions for gasoline sales abroad as Ukrainian drone strikes disrupt nation’s refinery runs. The ban was only marginally bullish, though, having been well-telegraphed by the Kremlin and limited in scope, with only resellers — companies that buy diesel inside Russia and then ship it abroad — impacted.
With WTI buffeted by the competing forces of geopolitical risks and bearish fundamentals, prices have been stuck in a band between roughly $62 and $67 a barrel since early August.
“Ultimately, we believe some combination of lower prices (slowing non-OPEC supply), supply disruptions, OPEC policy changes, and time (allowing demand growth to chew into oversupply) will be required to return this market to balance,” Vikas Dwivedi, Macquarie’s global oil and gas strategist, wrote in a note.
Oil Prices
WTI for November delivery dropped 1.7% to settle at $62.37 a barrel in New York.
Brent for November settlement, which expires on Tuesday, fell 1.4% to settle at $67.02 a barrel.
The more-active December contract slid 1.6% to settle at $66.03 a barrel.
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