Oil Retreats On Caution Ahead Of OPEC+ Meeting

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Oil prices saw a decline on Tuesday, offsetting the gains made in the previous two sessions. Investors became cautious regarding the OPEC+ meeting on Sunday, where the producer group may discuss deepening supply cuts due to the global slowdown. Brent crude futures went down by 0.6%, or 51 cents, to $81.81 a barrel while the US West Texas Intermediate crude futures were at $77.32 a barrel, down 0.7%, or 51 cents.


On Monday, both contracts had risen about 2% following news from three OPEC+ sources that the group was set to consider additional oil supply cuts when it meets on Nov. 26. However, these gains were reduced on Tuesday.

Short-term speculators took advantage of the situation and sold WTI after several indicators were overbought on technical charts, according to Singapore-based OANDA analyst Kelvin Wong. Wong also noted that “market participants have started to price in an extension of the current quantum oil supply cut into 2024 or even deeper cuts in the upcoming OPEC+ meeting.”


Eight analysts have predicted that OPEC+ is likely to extend or even deepen oil supply cuts into next year. Helima Croft, RBC Capital analyst, believes that “We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment.” However, reopening the quota agreements reached in June could prove challenging and could lead to protracted negotiations.


Oil prices have declined roughly 16% since late September due to crude output in the US, the world’s top producer, holding at record highs, while the market was also concerned about demand growth, particularly from China, the largest oil importer.


Traders were also keeping an eye out for signs of demand destruction from a possible US recession in 2024 and considering last week’s warning about possible deflation from Walmart, the largest US retailer.


According to a preliminary Reuters poll on Monday, US crude and gasoline stockpiles likely rose last week, while distillate inventories were seen dropping. Weekly stockpile reports from the American Petroleum Institute and the Energy Information Administration are due later on Tuesday and Wednesday, respectively.

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