Oil ends the week sharply higher but…
(Boursier.com) — Oil ends the week on the floor: a barrel of American light crude (WTI) for January delivery rises 2% to $70.7 on the Nymex and a barrel of Brent from the North Sea. February maturity rose 2% to $75.5 in London. A jump which should not prevent black gold prices from posting a seventh consecutive weekly decline, quite simply the longest negative series since 2018.
Both global benchmarks fell yesterday to their lowest level since late June on concerns about a glut of black gold and weak Chinese demand. Crude has closed every session in the red since last week’s meeting between the Organization of the Petroleum Exporting Countries and its allies, as the group’s plans for deeper cuts were met with skepticism and supply, outside the cartel, is booming, particularly in the United States.
OPEC+’s “weakening stance on support, coupled with record U.S. production and weak Chinese crude import figures, can only mean one thing: there is an abundance of oil available , which is clearly reflected in the contango structure of the two key crude oil benchmarks,” says Tamas Varga, analyst at PVM Energy.
Saudi Arabia and Russia, the world’s two largest oil exporters, on Thursday called on all OPEC+ members to join a deal on cutting production for the sake of the global economy, just days after a heated meeting between producer members. The Organization of the Petroleum Exporting Countries and its allies have agreed to a combined production cut of 2.2 million barrels per day in the first quarter of next year, part of it based on ‘mere voluntary actions’. ‘.
“Despite the commitments of OPEC+ members, we see a drop in total production of OPEC+ countries of only 350,000 bpd between December 2023 and January 2024,” Viktor Katona, senior analyst at Kpler, told ‘Reuters’. Some OPEC+ members could fail to meet their commitments due to unclear basic quotas and their dependence on hydrocarbon revenues, according to the specialist. U.S. production remained near record levels of more than 13 million bpd, according to data released Wednesday by the EIA.
“We believe the market is providing clear signals that should strengthen the bulls’ conviction,” Macquarie analysts told ‘Bloomberg’. “These signals include skepticism about the effectiveness of OPEC+ policy, perhaps finally, and strangely, a reluctance to bet against U.S. production growth after about a decade of outperformance by the U.S. shale industry , and perhaps an abandonment of the thesis of structural underinvestment.
The evolution of demand also raises concerns. Chinese consumption is expected to increase by 500,000 barrels per day next year, according to a ‘Bloomberg’ survey, or less than a third of the increase observed in 2023. And in the United States, many economists predict a recession in starting next year.