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SINGAPORE: Oil futures nudged higher on Monday, extending gains on expectations of deepening supply cuts from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, expected to shore up prices, which have fallen for four weeks on easing concerns of Middle East supply disruption amid the Israel-Hamas conflict.
Brent crude futures climbed 61 cents, or 0.76 percent, to $81.22 a barrel by 10:20 a.m. Saudi time, while US West Texas Intermediate crude was at $76.49 a barrel, up 60 cents or 0.79 percent.
Both contracts settled 4 percent higher on Friday after three sources of the OPEC+ told Reuters that it is set to consider whether to make additional oil supply cuts when it meets on Nov. 26.
Oil prices have dropped by almost 20 percent since late September, while prompt inter-month spreads for Brent and WTI slipped into contango last week. Prompt prices are lower than those in future months in a contango market, signaling sufficient supply.
“Our statistical model of OPEC decisions suggests that deeper cuts should not be ruled out given the fall in speculative positioning and in time spreads, and higher-than-expected inventories,” Goldman Sachs analysts said in a note.
The bank’s baseline forecast is that the existing group production cuts will stay fully in place in 2024 and that the unilateral cut of 1 million barrels per day by Saudi Arabia will be extended through the second quarter of next year and reversed only gradually from July.
IG analyst Tony Sycamore said WTI prices may rise toward $80 a barrel on the possibility that OPEC+ will announce deeper cuts at their upcoming meeting, although a drop below $72 will encourage the Biden administration to refill the US Strategic Petroleum Reserve.
“All of which suggests that a rebound in prices is likely in the first half of this week,” he added.
Investors are also eyeing disruption in Russian crude oil trade after Washington imposed sanctions on three ships that have sent Sokol crude to India.
On Friday, Moscow lifted a ban on gasoline exports, which could add to global supplies of motor fuel. This comes after Russia scrapped most restrictions on diesel exports last month.
In the Middle East, US and Israeli officials said a deal to free some of the hostages held in the besieged Gaza enclave was edging closer despite fierce fighting.
US energy firms also added oil and gas rigs for the first time in three weeks last week, said energy services firm Baker Hughes on Friday, with the oil and gas rig count serving as an early indicator of future output.