Brent Crude Resurges to $80 Following November 17 Dip

InfoStride News reported that Brent crude has rebounded to $80 per barrel after a brief dip to $72 on Friday, November 17. As of 4:21 PM GMT+1 on Sunday, November 19, Brent crude was recorded at $80.61 per barrel.

The drop below $80 per barrel was attributed to an increase in U.S. crude inventories and consistently high production levels. Analysts at Goldman Sachs acknowledged that, despite demand exceeding their optimistic predictions, oil prices have experienced a slight decrease this year. They attributed this trend to non-core OPEC countries producing more oil than expected, although OPEC’s cuts partially offset this.

Warren Patterson and Ewa Manthey from ING, as reported by Oil Price on November 17, noted that the current decline in oil prices increases the likelihood of Saudi Arabia extending its extra voluntary reduction of 1 million barrels per day into the beginning of next year. This move is anticipated to help eliminate the expected surplus and provide support to the market.

In recent discussions, Christyan Malek, the head of JPMorgan’s energy strategy, expressed concerns about the sharp decline in oil prices. He emphasized that this drop is not solely due to actions by commodity trading advisers shorting oil but also because the market is underestimating the possibility of more significant supply cuts at the upcoming November 26 OPEC+ meeting.

Speaking to Bloomberg, Malek shared his perspective, stating that the oil market appears to be assigning very low probabilities for deeper supply cuts. He believes the likelihood is higher than currently perceived, not as a base expectation but as a plausible scenario. According to Malek, deeper cuts may become necessary to proactively address potential weaknesses expected in the oil market during the first half of the following year.

Malek emphasized the need for potential cuts, considering existing demand trends and the overall balance in oil markets. Contrary to the belief that Saudi Arabia might not have much room for further cuts, Malek disagreed, suggesting there is more flexibility if they choose to reduce output. He speculated the possibility of substantial cuts from Saudi Arabia but indicated it’s more probable for them to advocate collective reductions among OPEC countries rather than implementing cuts on their own.

In the context of the November 2023 monthly oil market report (MOMR) from the Organization of Petroleum Exporting Countries (OPEC), there was an adjustment to the prediction for the growth in global oil demand for the year 2023. OPEC now estimates it to be around 2.5 million barrels per day, a slightly increased expectation compared to their earlier forecast.

Despite a solid foundation in the oil market, the MOMR also highlighted a recent drop in oil prices. OPEC attributed this decline to significant decreases in the amount of oil that financial market speculators expect to hold onto for the long term. These reductions in ‘net long positions’ by speculators occurred notably during October and contributed to the downward trend in oil prices.