Oil prices mark first gain in 5 sessions as traders await OPEC+ meeting

Which way the oil market breaks will largely depend on if OPEC+ can
“show continued unity as a group and commitment to ‘ stable’ (or really ‘higher’) prices over the long run,” analysts at Sevens Report Research wrote in Tuesday’s newsletter.

“If Thursday’s decision instills confidence in their ability to support prices effectively, then oil could make a run back into the mid-$80s or beyond,” they said. “However, if the group shows a fractured membership, then new 2023 lows are almost a certainty with a drop into the $50s well within the realm of possibility.”

News reports have said the delay came as African OPEC members objected to calls to reduce quotas, prompting negotiations ahead of the meeting. Saudi Arabia in July implemented a voluntary cut of 1 million barrels a day on top of existing reductions, a move that was credited with lifting crude sharply over the summer. Oil futures have subsequently pulled back sharply from 2023 highs set in late September on worries about the demand outlook.

The extension of additional voluntary cuts by Saudi Arabia would likely erase an expected crude surplus in the first quarter of next year, but if OPEC+ wants to provide more solid support to the market and ensure that stocks don’t build early next year, they need to agree on deeper and broader cuts, Warren Patterson and Ewa Manthey, commodity analysts at ING, said in a Tuesday note.

“The Saudis and OPEC+ have made a habit of surprising markets in recent years when it comes to their meetings. However, with aggressive cuts already in place, it does leave one wondering the degree to which the group could surprise the market with deeper-than-expected cuts,” they wrote.

Read: What an OPEC+ ‘flood the market’ scenario may do to oil prices

Traders also looked ahead to Wednesday’s weekly U.S. petroleum supply data from Energy Information Administration.

On average, analysts polled by S&P Global Commodity Insights expect the government agency to report a decline of 700,000 barrels in commercial crude inventories for the week ended Nov. 24. They also expect to see a weekly climb of 200,000 barrels in gasoline supplies and a 100,000-barrel fall in distillate stockpiles.