Oil Prices Retreat: Oil futures experienced a retreat on Tuesday, reversing recent robust gains, as investors adopted a cautious stance ahead of the upcoming OPEC+ meeting on Sunday. The meeting is expected to address the possibility of deepening supply cuts in response to concerns about slowing global growth.
Brent crude futures declined by 0.6%, reaching $81.81 a barrel, while U.S. West Texas Intermediate crude futures stood at $77.32 a barrel, down 0.7%. The pullback followed a 2% climb in both contracts on Monday, fueled by reports that OPEC+ might contemplate additional oil supply cuts during its Nov. 26 meeting.
However, short-term speculators opted to take profits on WTI amid technical indicators signaling overbought conditions, according to Kelvin Wong, an analyst at OANDA in Singapore. He noted that market participants had started factoring in the possibility of an extension of the current oil supply cut into 2024 or even deeper cuts.
The looming OPEC+ meeting has raised expectations that the group may opt to extend or deepen oil supply cuts into the coming year. Analysts anticipate a potential extension, with discussions likely revolving around sharing the burden of adjustments among OPEC+ members.
Also Read: Oil Market Balancing Act: OPEC+ Weighs Deeper Cuts Amidst Geopolitical Turbulence
Helima Croft, an analyst at RBC Capital, suggested that while there might be room for a deeper reduction, Saudi Arabia could seek additional contributions from other members to distribute the adjustment’s burden. However, she cautioned that reopening quota agreements could prove challenging, leading to protracted negotiations.
Oil prices have witnessed a 16% decline since late September, driven by sustained record-high crude output in the U.S. and concerns about demand growth, particularly from China, the world’s largest oil importer. Additionally, fears of a possible U.S. recession in 2024 and Walmart’s recent warning about potential deflation have heightened uncertainty among traders.
As the market awaits the OPEC+ meeting outcome, attention is also focused on U.S. crude and gasoline stockpile reports expected later in the week, providing further insights into market dynamics and potential demand trends.
Our Reader’s Queries
Why has the price of oil dropped so much?
The continuous decline in oil prices is causing concern among analysts who fear the impact of increased production worldwide. Despite the promises made by the Organization of the Petroleum Exporting Countries to limit supply, the market seems to be ignoring their efforts. This situation is causing a prolonged drop in oil prices, which is worrying for the industry.
Where are oil prices headed in 2024?
Experts are predicting that the oil prices in 2024 will hover around $90 per barrel. The U.S. Energy Information Administration (EIA) has forecasted that the global benchmark, Brent crude, will average at $93 per barrel, which is an increase from the expected average of $84 per barrel in 2023.
What is the forecast for oil prices?
According to a recent survey of 34 economists and analysts, the average forecast for Brent crude in 2024 is $82.56. This is a decrease from the consensus of $84.43 in November. Interestingly, only one contributor predicted prices to exceed $90 next year.
Will oil rally again?
According to Christyan Malek, Global Head of Energy Strategy and Head of EMEA Oil & Gas Equity Research at J.P. Morgan, the supply-demand gap in the energy sector is expected to emerge beyond 2025. This, coupled with the strengthening bottom-up sector fundamentals, has led to a bullish outlook.