Oil prices continued to climb on Monday, gaining over $1 following OPEC+‘s announcement to postpone plans for an output increase by one month. This decision comes as the market prepares for a week that includes a U.S. presidential election and a significant meeting in China. By 04:02 GMT, Brent futures had risen by $1.18 per barrel, translating to a 1.61 percent increase, reaching $74.28 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude saw an uptick of $1.21 per barrel, or 1.74 percent, bringing it to $70.70.
OPEC+ extends output cuts
On Sunday, OPEC+, which comprises the Organization of the Petroleum Exporting Countries along with Russia and other allies, confirmed it would extend its output reduction of 2.2 million barrels per day (bpd) into December. This extension follows a previous delay from October due to declining prices and weak demand. Initially, there were plans to increase production by 180,000 bpd starting in December, but the delay caught some market analysts off guard.
Gradual unwinding of cuts ahead
The cartel is expected to gradually reverse the 2.2-million-bpd cut over the coming months, while an additional 3.66 million bpd in production cuts will remain in effect until the end of 2025. Despite the recent gains, both Brent and WTI experienced weekly declines of approximately 4 percent and 3 percent, respectively, as record production levels in the U.S. pressured prices. However, both contracts saw a slight increase on Friday following reports that Iran might retaliate against Israel soon.
U.S. presidential election and economic outlook
As the U.S. presidential election approaches on Tuesday, polls indicate a tight race between Democratic Vice President Kamala Harris and Republican former President Donald Trump. Additionally, on Thursday, economists anticipate that the U.S. Federal Reserve will reduce interest rates by 25 basis points.
China’s economic stimulus measures
In China, the Standing Committee of the National People’s Congress is convening from Monday to Friday, with expectations to approve further stimulus measures aimed at revitalizing the slowing economy. Analysts suggest that a significant portion of this stimulus may be directed toward alleviating local government debt.
Continued gains despite weekly losses
On Friday, oil prices continued to rise, gaining more than $1 per barrel as they sought to mitigate weekly losses amid escalating geopolitical tensions in the Middle East. Brent crude futures, reflecting the January contract, rose by $1.41, or 2 percent, reaching $74.22 a barrel by 04:56 GMT. U.S. WTI crude futures also increased by $1.46, or 2.1 percent, to $70.72 a barrel, following a 0.95 percent rise in the previous session.
Market struggles to recover
Despite these recent gains, prices are expected to fall by over 1 percent for the week, struggling to recover from a notable 6 percent decline earlier. This drop was triggered by Israel’s military action against Iran on October 26, which, although it avoided hitting oil and nuclear sites, did not interrupt energy supplies. Analysts believe WTI’s rebound could persist, targeting last Friday’s closing price of around $71.80, as tensions in the Middle East remain a key concern.
U.S. inventory reports impact prices
Moreover, the U.S. Energy Information Administration (EIA) reported a surprising drop in gasoline inventories to a two-year low due to increased demand, while crude inventories also experienced an unexpected decrease as imports fell. Notably, the EIA highlighted that the U.S., the world’s leading oil producer, achieved a monthly production record of 13.4 million barrels per day in August.
Read more: 81.4 percent of Japan’s oil imports sourced from UAE, Saudi Arabia in September
Optimism surrounds fuel demand
On Thursday, oil prices continued to build on previous gains, buoyed by optimistic sentiment surrounding U.S. fuel demand following an unexpected reduction in both crude and gasoline inventories. Furthermore, speculation regarding OPEC+’s potential delay in its planned output increase added to the supportive environment. By 05:05 GMT, Brent crude futures had risen by 47 cents, or 0.65 percent, reaching $73.02 per barrel, while U.S. WTI crude futures, set to expire later that day, climbed by 43 cents, or 0.63 percent, to $69.04 per barrel. Both contracts had surged by over 2 percent on Wednesday, recovering from earlier week declines as fears of an expanded conflict in the Middle East eased.
EIA reports and market reactions
The EIA’s unexpected inventory decrease revealed that gasoline stockpiles fell to a two-year low during the week ending October 25, driven by increased demand. Additionally, crude inventories saw a surprising reduction linked to lower import levels. Data from the American Petroleum Institute (API) indicated a decline in U.S. oil inventories by 0.57 million barrels last week, contrary to expectations for a 2.3 million barrel increase. This trend typically foreshadows a similar result in the official inventory report anticipated later on Wednesday, providing some relief to oil markets by suggesting that supplies remain relatively tight in the world’s largest fuel-consuming nation.
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