Oil prices start week with decline

Crude oil prices began the week with a slide ahead of the postponed OPEC+ meeting that will now be held on November 30.

The decline followed a modest increase last week on traders’ expectations that Saudi Arabia and Russia, the de facto leaders of the OPEC+ extended cartel, would extend their voluntary supply cuts into 2024, according to OilPrice.com.

However, prices were pressured—and the pressure remains—by disagreements among OPEC members. According to reports citing insiders, the disagreements had to do with two members—Nigeria and Angola—wanting to have their production quotas increased so they could sell more crude.

News of the disagreements weighed on prices last week but since then follow-up reports have suggested that OPEC is making progress on a resolution of these differences, lifting some of that weight.

It appears, however, that the most important question is whether Saudi Arabia will roll over its supply cuts of 1 million bpd and the impact on prices if it decides to not do it. There is also the possibility of deeper cuts as well.

“Expectations are that Saudi Arabia will at least roll over its additional voluntary cut of 1MMbbls/d into next year,” ING’s head of commodity strategy Warren Patterson and commodity strategist Ewa Manthey wrote in a note.

“Clearly, if we do not see this, it would put further downward pressure on the market, given the surplus over 1Q24. We believe that the Saudis will roll over this cut and there is a growing possibility that we see a deeper cut from the broader group.”

“Saudi Arabia and other OPEC+ members will be keen to avoid any disunity,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, told Bloomberg. “OPEC+ will have to show significant supply discipline, or at least jawbone such ability, to alleviate market worries of a deep surplus in oil markets next year.”