LONDON: Oil prices dropped to their lowest since early January on Monday after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are discussing an output increase.
Brent crude futures for January had slipped $4.07, or 4.7%, to $83.55 a barrel. US West Texas Intermediate (WTI) crude futures for December were down $4.02, or 5%, at $76.06 ahead of the contract’s expiry later on Monday. The more active January contract was down $3.82, or 4.8%, at $76.29.
An increase of up to 500,000 barrels per day (bpd) will be discussed at the OPEC+ meeting on December 4, The Wall Street Journal reported.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia’s energy minister was quoted this month as saying the group will remain cautious.
Meanwhile, supply fears have largely receded while concerns over Chinese fuel demand and US dollar strength weighed on prices.
Expectations of further increases to interest rates have buoyed the greenback, making dollar-denominated commodities more expensive for investors.
“Apart from the weakened demand outlook due to China’s COVID curbs, a rebound in the US dollar yesterday was also a bearish factor for oil prices,” said CMC Markets analyst Tina Teng.
“Risk sentiment becomes fragile as all the recent major countries’ economic data point to a recessionary scenario, especially in the UK and eurozone,” she said, adding that hawkish comments from the US Federal Reserve last week also sparked concerns over the US economic outlook.
New COVID case numbers in China remained close to April peaks as the country battles outbreaks nationwide.
The front-month Brent crude futures spread narrowed sharply last week while WTI flipped into contango, reflecting dwindling supply concerns.
Days earlier, Saudi Arabia’s energy minister had said OPEC+ will remain cautious on oil production, noting that members saw “uncertainties” in the global economy ahead of the bloc’s next meeting in December.
“Our theme is being cautious,” Prince Abdulaziz bin Salman had told Bloomberg TV in an interview on the sidelines of the COP27 climate summit in Sharm el-Sheikh, Egypt, adding “it’s about being responsible and not losing sight of what the market requires.” The OPEC and its allies including Russia had decided to lower targeted production by 2 million barrels per day (bpd) in October, despite opposition to cuts from the United States and others. –Agencies
