Oil Prices Rise Ahead of OPEC+ Decision

Fuel Oil

05 Dec 20243 Min ReadDaily Market Report

The petroleum market witnessed mixed trends with slight increases in crude oil futures ahead of the OPEC+ meeting, which could influence production cuts. Supply dynamics show reduced US crude inventories but increased motor gasoline stocks, while geopolitical tensions and seasonal factors shape market sentiment.

Key Highlights:

Crude Oil Prices: Brent and WTI futures showed marginal gains, while MCX futures saw slight declines, reflecting market caution before the OPEC+ meeting.
Supply and Demand: US crude oil inventories decreased by 5.1 million barrels, while motor gasoline inventories rose by 2.4 million barrels, indicating shifts in supply-demand dynamics.
Geopolitical Impact: Political unrest and conflicts in the Middle East and South Korea contributed to crude price stability, despite market fluctuations.
OPEC+ Projections: Experts anticipate extended production cuts by OPEC+ into 2024, balancing market share against price stability amid global uncertainties.

Crude Oil Prices: Market Trends Ahead of OPEC+ Meeting

Crude oil futures traded higher on Thursday morning as market players awaited the outcome of the OPEC+ (Organization of the Petroleum Exporting Countries, and allies) meeting later in the day.
February Brent oil futures were at $72.37, up by 0.08 per cent, and January crude oil futures on WTI (West Texas Intermediate) were at $68.64, up by 0.15 per cent.
December crude oil futures were trading at ₹5828 on Multi Commodity Exchange (MCX)during the initial hour of trading on Thursday against the previous close of ₹5848, down by 0.34 per cent, and January futures were trading at ₹5816 against the previous close of ₹5838, down by 0.38 per cent.

US Supply Dynamics: Inventories and Imports

With the OPEC+ meeting scheduled for later on Thursday, many market players believe that the group will delay plans to increase crude oil production output due to weakness in crude oil prices and concerns over decline in demand for the commodity in the global market. However, the demand sentiments have increased in the recent days.
It is to be noted here that the OPEC+ had reduced production output by more than 2 million barrels in the last two years.
Meanwhile, the latest data by the US EIA (Energy Information Administration) showed a decline in the crude oil inventories in the US for the week ending November 29.
According to EIA, US commercial crude oil inventories decreased by 5.1 million barrels for the week ending November 29, from the previous week. At 423.4 million barrels, US crude oil inventories were about 5 per cent below the five-year average for this time of year.
However, total motor gasoline inventories increased by 2.4 million barrels from last week and were about 4 per cent below the five-year average for this time of year.
Total products supplied in the US over the last four-week period averaged 20.4 million barrels a day, up by 4 per cent from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.8 million barrels a day, up by 2.8 per cent from the same period last year.

Polymer News: Geopolitical Influence on Petroleum Markets

US crude oil imports averaged 7.3 million barrels a day last week, an increase of 1.2 million barrels a day from the previous week. Over the past four weeks, crude oil imports averaged about 6.9 million barrels a day, 5 per cent more than the same four-week period last year.
Factors such as reports of ceasefire violations between Israel and Hezbollah, political unrest in South Korea, and increased tensions in Syria provided support to crude oil prices.
December natural gas futures were trading at ₹259.50 on MCX during the initial hour of trading on Thursday against the previous close of ₹258.70, up by 0.31 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), December cottonseed oilcake contracts were trading at ₹2694 in the initial hour of trading on Thursday against the previous close of ₹2690, up by 0.15 per cent.

Expert Opinion: Prolonged Cuts and Market Implications

The Organization of the Petroleum Exporting Countries and its allies are expected to prolong current supply cuts by at least three months into 2024. OPEC+ aims to balance the market amid fluctuating demand and geopolitical tensions.
Its is anticipated that OPEC+ may choose between bolstering prices or defending market share. The decision could prompt a short-term market reaction, but broader expectations of a U.S. economic recovery and persistent Middle East unrest suggest a potential price rally by year-end.