Oil Prices Slide into Bear Market Amidst Supply Pressure on OPEC+

by Victor Adetimilehin

Oil prices experienced a resurgence as market sentiment suggested OPEC and its partners are poised to counter the recent sharp decline in prices. West Texas Intermediate (WTI) saw a 4% rally, nearing $76 per barrel, largely influenced by Goldman Sachs Group Inc. analysts’ expectations that the Organization of Petroleum Exporting Countries (OPEC) will take measures to stabilize prices in their upcoming meeting. Global benchmark Brent also surged, rising by as much as 4.3% to surpass $80.

Saudi Arabia and Russia, as the largest producers within OPEC+, have already committed to maintaining additional production cuts until the year’s end. However, recent weeks have seen an increase in Russia’s crude exports. Goldman Sachs analysts, including Daan Struyven, noted that they anticipate OPEC’s actions will steer Brent oil prices into a range of $80 to $100 in 2024, leveraging their influence and ensuring a modest deficit.

Despite this optimism, the U.S. benchmark is on track for a weekly decline of about 2%, marking its fourth consecutive weekly retreat, with a decline of more than 20% from September’s highs. Oversupply concerns have mounted in recent weeks, causing real-world barrel prices to soften steadily. Shipments from Guyana and the North Sea are expected to rise next month, accompanied by surging U.S. exports.

Technical factors have exacerbated recent price weakness, with key market indicators trading in a bearish contango structure for the first time in months. Additionally, the 200-day moving average was breached in recent days, intensifying selling pressure. Inventory data from the U.S. showed a significant increase in stockpiles, particularly at the critical storage hub of Cushing, Oklahoma. This buildup coincides with seasonal refinery maintenance, reducing their demand for crude. Concurrently, overseas shipments have surged as U.S. production continues to rise.

The demand outlook remains uncertain. Data from China, the world’s largest crude importer, indicates that daily processing rates were reduced in October as apparent oil demand declined from the previous month. Meanwhile, the U.S. witnessed unemployment benefits rising to their highest level in nearly two years, signaling a potential slowdown in the world’s largest consumer of crude.

While challenges persist, the energy market remains dynamic, with various factors at play. The upcoming OPEC+ meeting and evolving global economic conditions will play a crucial role in shaping the future of oil prices.

Source: Energy Connects

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