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Futures Movers: Oil ends higher with OPEC+ expected to keep current output deal in place this week

Oil futures kicked off November with a gain on Monday after hitting multiyear highs last month, as investors expect the Organization of the Petroleum Exporting Countries and their allies to remain reluctant to accelerate production increases despite tightening crude supplies.

The group of oil producers has “so far refused to act despite a severe power crunch in Europe and repeated calls for higher oil output from India and several other oil importing nations,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.

OPEC+ may keep to the current agreement and raise output by 400,000 barrels per day, or it may decide to lift production even more. The group may opt to raise output by 800,000 barrels per day this time, “in order to reduce the immediate risks of any supply shortages and to ease the pressure on prices, but then don’t raise output at all in the next meeting,” said Razaqzada. “Any deviation from the current policy should move oil prices sharply.”

Read: OPEC+ needs to ‘thread the needle’ between higher oil prices and losing market share

West Texas Intermediate crude for December delivery
CL00,
+0.57%

CLZ21,
+0.57%

rose 48 cents, or 0.6%, to settle at $84.05 a barrel on the New York Mercantile Exchange. The U.S. benchmark rose 11% in October, but lost 0.9% last week, ending a streak of nine straight weekly gains. January Brent crude
BRN00,
-0.11%

BRNF22,
-0.11%
,
the global benchmark, added 99 cents, or 1.2%, to $84.71 a barrel on ICE Futures Europe. Brent fell 1.3% last week but rose 7.5% in October.

The Biden administration has called on OPEC+ to boost output, but producers have remained reluctant. OPEC+ has so far stuck to a plan to boost output in monthly increments of 400,000 barrels a day, but members have struggled to hit that goal. The group is slated to meet Thursday.

“We would expect noise from key consumers to increase over the remainder of the week…For now, it looks as though the group will try resist being more aggressive in its easing plan and stick to increasing output by 400,000 barrels per day per month,” said Warren Patterson, head of commodities strategy at ING, in a note.

The expected resumption of Iranian nuclear talks this month, meanwhile, could make OPEC+ members more reluctant to further boost output if there is the potential for higher Iranian exports, he said.

Oil prices climbed Monday despite news that China has released reserves of gasoline and diesel to boost supply and help stabilize prices in some regions, according a Reuters report Sunday, citing a statement from the National Food and Strategic Reserves Administration.

For now, the market is “ignoring bearish developments such as China deciding to release oil products from state reserves and a general worsening of COVID-19 cases in Eastern Europe,” said Louise Dickson, senior oil market analyst at Rystad Energy, in a daily note.

““Instead of pumping more supply, OPEC+ will likely stay behind the demand curve, rather than risk jumping ahead and getting burned.””

— Louise Dickson, Rystad Energy

“Calls from the U.S. president himself to alleviate the tight oil supply environment are not expected to be answered by OPEC+ producers, as both heavyweight policy drivers Saudi Arabia and Russia have been vocal about wanting to wait out the short-term market tightness,” she said.

“Instead of pumping more supply, OPEC+ will likely stay behind the demand curve, rather than risk jumping ahead and getting burned,” said Dickson.

In other Nymex trading, December gasoline
RBZ21,
+1.72%

tacked on 1.7% to $2.409 a gallon and December heating oil
HOZ21,
+1.08%

added 1% to $2.503 a gallon.

December natural gas
NGZ21,
-4.83%

settled at $5.186 per million British thermal units, down 4.4% on Monday.

“Mild weather outlooks and improving inventories are helping put pressure on prices,” said Christin Redmond, commodity analyst at Schneider Electric, in a daily note.

The Energy Information Administration reported last week that U.S. natural-gas supplies in storage rose by 87 billion cubic feet for the week ended Oct. 22. That was 25 bcf larger than the five-year average, said Redmond.

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