As the global oil market anticipates the OPEC+ alliance meeting on November 26, key decisions on production policies are on the horizon. Despite rising worries about the global economy, OPEC remains optimistic about the world’s crude oil demand.
Oil prices saw a 2.0% climb on Friday, supported by Iraq’s backing of OPEC+’s production cuts and traders covering short positions ahead of the weekend. However, the week marked a 4.0% loss, the third consecutive week of declines.
The rally was fueled by addressing record short positions, and support from Saudi Arabia and Russia confirming ongoing output cuts. Reductions in the US rig count also hinted at potential future output decreases.
Brent futures rose 1.8% to $81.43 a barrel, while US West Texas Intermediate (WTI) crude increased by 1.9% to $77.17 per barrel.
Iraq, a crucial OPEC member, expressed commitment to the OPEC+ agreement on production levels. Iraqi Oil Minister Hayan Abdel Ghani reported a 350,000 barrels per day increase in oil exports from southern fields.
Vijay Valecha, Chief Investment Officer at Century Financial, highlighted concerns about weaker demand, with oil prices facing a sharp decline over the past three weeks. The focus is back on fundamentals, with refining margins falling and stockpiles rising in China, the largest importer.
Despite market uncertainties, OPEC maintains a positive outlook on global oil demand. Secretary-General Haitham Al Ghais emphasized optimism about demand, stating, “We are positive on the demand; we’re still quite robust on demand.”
The upcoming OPEC+ meeting at the end of the month will be crucial in reviewing supply and demand fundamentals. Al Ghais noted, “When the ministers meet in Vienna at the end of this month, they will review all of this and take appropriate measures.”
In its October report, OPEC kept its demand forecast for 2023 and 2024 unchanged, projecting a rise in global oil demand amid an improving Chinese economy.
Last week, both Saudi Arabia and Russia confirmed their commitment to continue oil output cuts through year-end. In the US, the number of oil rigs operating decreased for the second consecutive week to the lowest since January 2022, indicating potential future output adjustments.
Concerns about weakening demand surfaced as Chinese refiners, the largest buyers of Saudi Arabian crude, asked for less supply for December, reflecting in weak Chinese economic data.
As the oil industry navigates economic challenges, the OPEC+ meeting holds significance for shaping the future direction of global oil production and demand.
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