Oil prices pushed lower on Thursday, as investors grew increasingly unsettled following a decision by the Organization of the Petroleum Exporting Countries and its allies to delay a much anticipated meeting by four days.
Price drivers
West Texas Intermediate crude futures CL.1 CL00 CLF24 for January delivery fell $1.51, or 1.9%, to $75.83 a barrel. On Wednesday, the contract settled down 0.9% to $77.10 a barrel on the New York Mercantile Exchange, but off a session low that saw it plunge to $73.79.January Brent crude BRN00 BRNF24, the global benchmark, fell $1.52, or 1.8%, to $80.44 a barrel. Wednesday saw the contract drop 0.6% to $81.96 a barrel on ICE Futures Europe, having touched a low of $78.41.
Market drivers
Oil prices tumbled briefly on Wednesday following reports of a delay to an OPEC+ meeting, originally expected this weekend, but which has now been pushed back to Nov. 30. Investors had been speculating ahead of the crucial gathering on whether OPEC+ would deepen cuts to help boost prices that have struggled for traction this year.
Hefty weekly gains in U.S. crude inventories, reported by both the Energy Information Administration and the American Petroleum Institute, also weighed on prices, which ultimately recouped most of the losses.
“Reports later in the day that the disagreement mainly involved three African countries who are seeking to raise their 2024 production quotas eased concerns of deeper differences within the cartel,” said Raffi Boyadjian, lead investment analyst at XM, in a note.
“Still, even if it’s simply a matter of more time needed to hash out a deal, there seems to be a reluctance within OPEC+ for additional cuts and it’s unclear how long Saudi Arabia will be willing to carry most of the burden of balancing the oil market by itself,” said the analyst.
UBS analysts said they expect the oil cartel will reach an agreement on cuts at the meeting, but prices would stay volatile in the near term.
“The concern in the market is that no deal among OPEC+ member states could result in a return of 1.3 mbpd [million barrels of oil per day] at the start of the year,” said strategist Giovanni Staunovo.
Similar views were expressed by a team of Citi analysts led by Eric Lee, who said they expect Saudi Arabia will roll its 1 million barrel per day voluntary cut through the first quarter of next year, and the rest of the members will broadly agree to existing quotas through 2024.
“Having said this, the likelihood of a bearish outcome from the meeting appears to have risen given the meeting delay and potential broader disagreements,” said Lee and his team.
They noted prices did hold up fairly well on Wednesday, but that that was “consistent with net speculative positioning already being very low,” and prices are largely trading in line with current physical market fundamentals.
Ole Hansen, head of commodity strategy at Saxo Bank, cited data from the Commodity Futures Trading Commission from the week to Nov. 14, showing how Brent and WTI futures have seen “almost uninterrupted selling from hedge funds since the net long hit a new two-year peak on Sept. 19.”
So rattled were investors on Wednesday, though, that many went looking for protection from a potential price slump. A record 211,000 Brent crude put options, which give investors the right but not obligation to sell a certain asset at a given time, were traded, according to Bloomberg News, citing ICE Futures Europe data.