BENGALURU – Oil prices experienced a more than 1% increase on Monday, fueled by optimism stemming from OPEC‘s monthly market report alleviating concerns about diminishing demand. Simultaneously, worries mounted over a U.S. inquiry into suspected violations of Russian oil sanctions, raising apprehensions about potential disruptions in supply.
Brent crude futures witnessed a gain of US$1.09, or 1.3%, settling at US$82.52 per barrel. In parallel, U.S. West Texas Intermediate (WTI) crude futures also rose by US$1.09, or 1.4%, settling at US$78.26 per barrel.
In its monthly report, OPEC asserted that oil market fundamentals remained robust and attributed a drop in prices to speculators. While addressing concerns about demand, OPEC slightly revised its 2023 forecast for global oil demand growth and maintained its relatively high prediction for 2024.
Craig Erlam, Senior Market Analyst at OANDA, remarked, “The OPEC monthly oil market report appeared to push back against demand concerns, referencing overblown negative sentiment around Chinese demand while raising demand growth forecasts for this year and leaving them unchanged for next.”
Reports of the U.S. Treasury Department intensifying scrutiny on Russian oil exports also contributed to the upward momentum in oil prices, according to UBS analyst Giovanni Staunovo. The Treasury issued notices to ship management companies seeking information on 100 vessels suspected of violating Western sanctions on Russian oil.
Last week, the U.S. Energy Information Administration (EIA) indicated a slightly lower-than-expected increase in the country’s crude oil production for the year, coupled with a forecast of declining demand. On Monday, the EIA predicted a second consecutive monthly decline in U.S. oil output for December.
Despite weak economic data from China, the leading crude importer, and reduced supply requests from Saudi Arabia by Chinese refiners, oil prices demonstrated resilience. Analysts, including Fawad Razaqzada from City Index, suggested that oil prices may have found a bottom after a 4% decline last week, marking their first three-week descending streak since May.
Razaqzada expressed optimism, stating, “Given that oil prices have weakened in the last few weeks, Saudi Arabia and Russia will likely continue with their voluntary supply cuts into next year. This should, therefore, limit the downside potential.”
Last week, major oil exporters Saudi Arabia and Russia, part of the OPEC+ group, affirmed their commitment to extending additional voluntary oil output cuts until the year-end. The decision reflects ongoing concerns about demand and economic growth impacting crude markets. The next OPEC+ meeting is scheduled for November 26.