Oil Climbs as OPEC+ Plans to Pause Hikes Amid Surplus Forecasts
Oil rose after OPEC+ signaled that it’ll pause output increases next quarter, following a modest hike for next month.
Brent for January rose above $65 a barrel, while West Texas Intermediate was near $61. The Organization of the Petroleum Exporting Countries and allies said on Sunday they would raise output by 137,000 barrels a day in December, matching expectations. The group will then take a January-to-March hiatus.
Global benchmark Brent has slumped about 10% over the past three months, as the market faces the prospect of ballooning oversupply. Still, prices recently bounced from a five-month low after tighter US sanctions on Russian producers raised some question marks about supply prospects from that nation.
The OPEC+ output decision and planned pause is “an acknowledgment from the group that the market is facing a sizable surplus next year,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. There’s plenty of uncertainty over the scale of oversupply, and it is also unclear how disruptive the latest sanctions on Russia will be, he added.
The eight key members of OPEC+ are left with roughly 1.2 million barrels a day of their current supply tranche still to restore. Actual output increases have fallen short of advertised volumes, as some members offset earlier overproduction and others struggle to pump more.
Following the OPEC+ move, Morgan Stanley raised its near-term price forecast for Brent, while also maintaining a warning for a “substantial surplus.” The United Arab Emirates, meanwhile, on Monday added to the chorus of producers who have come out to downplay glut concerns.
Traders will also be monitoring disruptions to flows, after a Ukrainian drone attack in the Black Sea left a tanker ablaze and damaged loading facilities in the port city of Tuapse. The area is home to a refinery run by Rosneft PJSC, which was sanctioned last month by the US, along with Lukoil PJSC.
President Donald Trump, meanwhile, threatened possible US military action against Islamist militants in Nigeria, Africa’s largest oil producer, if the country’s government didn’t halt the groups’ “killing of Christians.” He also hinted at an immediate cutoff in aid to the OPEC member.
Brent for January settlement rose 0.4% to $65.01 a barrel at 4:15 p.m. in Singapore.
WTI for December delivery advanced 0.4% to $61.23 a barrel.
Source : Bloomberg
