Oil Mixed As Expected OPEC Output Cuts Receive Increased Scrutiny

by Ship & Bunker News Team
Tuesday November 21, 2023

Oil prices on Tuesday were mixed for seemingly the same reason it rose in the previous session: on expectations that the Organization of the Petroleum Exporting Countries (OPEC) will enact further supply cuts when it meets next weekend.

Brent rose 13 cents to $82.45, while West Texas Intermediat declined 6 cents to $77.77.

A host of analysts have predicted that OPEC is likely to extend or even deepen production cuts into next year, but Helima Croft, analyst at RBC Capital, put a slight spin on the forecast by noting that "We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment."

Phil Flynn, senior market analyst at Price Futures Group Inc., explained Tuesday's trading mindset by noting that investors were taking profits ahead of the U.S. Thanksgiving holiday on Thursday: "The market is getting back on track."

It was also said that short-term speculators were taking profit amid overbought territory.

The Israel/Hamas war also factored into Tuesday's trading, with a sense of optimism kindled due to U.S. president Joe Biden stating that a deal to free some hostages taken by Hamas during its massacre of Israelis is imminent.

For his part, Dennis Kissler, senior vice president for trading at BOK Financial Securities, suggested that an anticipated increase in U.S. stockpiles combined with WTI's contango structure were limiting gains, "But its mostly a choppy trade until we see what OPEC+ is going to do."

Also on Thursday, the International Energy Agency became the latest organization to question the efficacy of OPEC's anticipated output cuts.

Toril Bosoni, the head of oil industry and markets division at the IEA, told media that even if production and exports are curtailed into 2024 the current global market deficit will still become a slight surplus next year.

The IEA earlier stated that with demand still exceeding available supplies heading into the Northern Hemisphere winter, market balances will remain vulnerable to heightened economic and geopolitical risks – and further volatility ahead.