The oil price was steady ahead of an OPEC+ meeting on Monday to discuss production policy amid a rapidly tightening market.
Futures in New York traded near $76 a barrel after capping a sixth weekly gain on Friday. The alliance, led by Saudi Arabia and Russia, may have to consider raising output in November by more than its planned 400,000 barrels a day, according to some market watchers. OPEC’s own modeling is showing demand will outstrip supply over the next two months.
The market has tightened significantly recently following a robust rebound in demand from economies recovering from the pandemic and a supply disruption in the Gulf of Mexico due to Hurricane Ida. Surging natural gas prices ahead of winter have also raised the prospect of higher volumes of oil products being consumed in power generation, potentially boosting overall demand.
“An OPEC+ decision to add more supply to the market than planned could calm prices down,” said Vandana Hari, founder of Vanda Insights in Singapore. “But it is by no means a slam dunk. Such a proposal could spark off plenty of debate and disagreement, especially as crude backed off from $80.”
-West Texas Intermediate for November delivery dipped 0.4% to $75.58 a barrel on the New York Mercantile Exchange at 12:08 p.m. in Singapore after rising 1.1% on Friday.
-Futures climbed 2.6% last week.
-Brent for December settlement slipped 0.3% to $79.02 on the ICE Futures Europe exchange after front-month prices advanced 1.5% last week for a fourth weekly gain.
-The prompt timespread for Brent was 76 cents in backwardation, compared with 52 cents at the start of last month.
OPEC+ production policy will be the main factor influencing oil prices over the coming months, according to Vitol Group. There’s little chance of Iranian barrels returning this year and U.S. shale producers aren’t investing enough to raise output quickly, Mike Muller, the head of Asia for Vitol, said on a Sunday webinar hosted by Dubai-based consultancy Gulf Intelligence.
Fuel switching due to high coal and gas prices is likely to see oil demand rise by 500,000 barrels a day this winter, Sri Paravaikkarasu, head of Asia oil at FGE, said during a Bloomberg Television interview. A cold winter could see consumption climb by a further 200,000 to 300,000 barrels a day, she added.