As markets and investors eagerly anticipated the 51st meeting of the Joint Ministerial Monitoring Committee and the 36th OPEC and non-OPEC Ministerial Meeting (ONOMM), scheduled for next Sunday to discuss oil supply levels, they were taken aback by an unexpected announcement from the Organization of the Petroleum Exporting Countries (OPEC). The statement announced the unexpected postponement of the meeting originally planned for November 26, now rescheduled for a later date.
Read more: OPEC’s boosted global demand forecasts dampen concerns, fuel oil price surge
The statement issued did not provide any specific reasons for the postponement, leading to increased speculation regarding the decision. This uncertainty prompted an immediate drop in oil prices of approximately 4 percent, causing them to trade below $79.
According to sources cited by Reuters, the decision to delay the OPEC+ meeting was reportedly influenced by disagreements among member states regarding current output levels and the potential need for cuts.
The sources revealed that Saudi Arabia and Russia reached an agreement to put off the meeting due to unresolved matters concerning other participating producers.
Three sources within OPEC+ indicated that the delaying was specifically linked to African countries.
Following their previous meeting in June, OPEC+ announced that the output quotas for Angola, Nigeria, and Congo for the year 2024 would be subject to evaluation by external analysts before being finalized.
According to analysts and sources within OPEC+, the scheduled meeting on Sunday, which includes OPEC members and their allies such as Russia, was expected to primarily revolve around discussions regarding further modifications to an agreement intended to enforce supply limitations until 2024.
An anonymous source within OPEC+ informed Reuters that the decision to defer the meeting was likely made to provide additional time for countries to engage in discussions regarding their compliance with existing output cuts, as well as potential cuts in the future.
Challenging negotiations
According to participants in the talks cited by Bloomberg, Saudi, which had previously announced a voluntary reduction of 1 million barrels per day (bpd) in July, was engaged in challenging negotiations with other member states regarding their respective production levels.
Despite initial expectations that cutting output would result in a significant oil supply shortage, the price of crude has experienced a decline of nearly 18 percent since reaching its peak in September. Additionally, forecasts for the market in the coming year have also diminished, as crude supply surpluses have resurfaced during the first half of the year.
Factors leading to decline
Anas Alhajji, an oil expert, said the daily energy report indicates that oil prices experienced a shrink of over 4 percent due to the following news:
- The OPEC meeting has been rescheduled to 30 November, and several analysts speculate that the delay is a result of disagreements among OPEC+ members. However, there are multiple complex issues that require sufficient time for resolution. These issues might be more significant and intricate than what is currently anticipated.
- An agreement on a ceasefire and hostage exchange has been reached between Israel and Hamas, leading to a decrease in political risks.
- The United States (U.S.) witnessed a significant surge in crude oil and gasoline inventories that surpassed all forecasts, highlighting an unexpected and substantial increase.
The U.S. Energy Information Administration (EIA) confirmed that crude stocks experienced a notable increase of 8.7 million barrels during the previous week, reaching a total of 448.1 million barrels. This figure far exceeded analysts’ expectations, as a Reuters poll had predicted a more modest rise of 1.2 million barrels.
According to the Administration’s report, oil stocks at the Cushing delivery center in Oklahoma registered a significant rise of 858,000 barrels during the previous week. Additionally, U.S. crude refineries observed an increase in consumption of 105,000 bpd over the same period.
Last week, there was a 0.9 percentage point increase in the operating rates of refineries.
According to the announcement, gasoline stocks saw a rise of 749,000 barrels, reaching a total of 216.4 million barrels during the previous week. This increase contradicted analysts’ expectations, as they had predicted a decline of approximately 150,000 barrels.
Based on the Administration’s data, distillate inventories, which encompass diesel and heating oil, decreased by 1.02 million barrels during the previous week, reaching a total of 105.6 million barrels. This decline in inventories contrasted with forecasts, which had predicted a decrease of approximately 761 barrels.
Morgan Stanley
Morgan Stanley anticipates that the price of Brent crude per barrel will maintain support at approximately $85. This projection is based on the expectation that OPEC+ will persist in curbing production, thereby contributing to the stabilization of oil stocks at their present levels.
According to analysts at the Bank, the market has limited capacity to accommodate additional OPEC oil. They noted that they had estimated OPEC oil demand for 2024 to be 28.3 million bpd, which remains unchanged for the fourth consecutive year.
The analysts at the Bank have revised their assumptions, now anticipating that Saudi will extend voluntary cuts until the end of the second quarter of the following year. They expect production to gradually increase during the latter half of that period, while still remaining below Saudi’s official OPEC share of 10.5 million bpd.
For more news on markets, click here.
