Oil prices rise as OPEC counters demand concerns; Brent at $82/bbl

In its monthly report, OPEC said that oil market fundamentals remained strong and blamed speculators for a drop in prices. OPEC made a slight increase to its 2023 forecast for global oil demand growth and stuck to its relatively high 2024 prediction.

Brent crude futures for January were up 73 cents at $82.16 a barrel, having lost $1 in early trading, while US West Texas Intermediate (WTI) crude futures for December were up 70 cents at $77.87, according to news agency Reuters.

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a November 17 expiry, was last trading higher by 0.7 per cent at ₹6,500 per bbl, having swung between ₹6,356 and ₹6,515 per bbl during the session so far, against a previous close of ₹6,455 per barrel.

Also Read: From $89 to near $100 and back: How Brent crude moved since last Diwali over OPEC+ cuts & more

What’s driving crude oil prices?

-Despite some crude price losses being recouped on Friday as Iraq voiced support for oil production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia (OPEC+), they still fell about 4 per cent on the week to register the first three-week losing streak since May.

-OPEC’s data indicate that oil inventories — already below average levels — ought to be depleting this quarter at a record pace of 3 million barrels a day. “Despite the above healthy and supportive market fundamentals, oil prices have trended lower in recent weeks, mainly driven by financial market speculators,” said OPEC.

-Investors had been worried after the US Energy Information Administration (EIA) last week said that the country’s crude oil production this year will rise by slightly less than previously expected and that demand will fall. Next year, per capita US petrol consumption could fall to the lowest level in two decades, it said.

-Markets were also wary of potential US policy tightening after Federal Reserve Chair Jerome Powell said last week that it could raise interest rates again if inflation isn’t curbed. Analyst say that crude oil will not welcome a more hawkish Fed policy stance given the recent demand data by US and China.

-Weak economic data last week from China, the world’s biggest crude oil importer, also raised fears of faltering demand. Chinese refiners asked for less supply for December from Saudi Arabia, the world’s largest exporter. China’s consumer prices fell to pandemic-era lows last month, sparking concern about the country’s economic recovery.

Also Read: Crude oil to average at $120/bbl in 2024; World GDP growth downgraded on Middle East tensions: Fitch

-Higher-than-expected oil prices, stemming from potential disruptions in the Middle East’s oil supply due to conflicts, could significantly impact global economic growth and lead to a surge in inflation, Fitch Ratings said in its latest Global Economic Outlook (GEO) report.

-Due to supply restrictions, oil prices average $120/bbl in 2024 and $100/bbl in 2025, according to Fitch. High oil prices lead to a potential 0.4 percentage point (pp) reduction in world gross domestic product (GDP) growth in 2024, with a lingering 0.1 pp lower growth in 2025. 

-Last week top oil exporters Saudi Arabia and Russia, part of OPEC , confirmed they would continue with additional voluntary oil output cuts until the end of the year as concerns over demand and economic growth continue to drag on crude markets.

OPEC+ will meet for its next scheduled oil output policy decision on November 26.

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Updated: 13 Nov 2023, 10:29 PM IST