Brent regains some ground on hopes of extended OPEC+ output cuts

The front-month ICE Brent contract has leaped $3.04/bbl higher on the day from Friday, to $80.94/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has climbed back above $80/bbl as market participants predict Saudi Arabia and Russia will extend their production cuts into 2024. An announcement is expected at OPEC+'s joint ministerial meeting on 26 November.

It is rumored that the US will impose tighter sanctions on Iran, ANZ’s senior commodity strategist Daniel Hynes writes in a recent report. “Ship tracking data suggests [Iranian exports] are not far off levels seen before the US pulled out of the Iran nuclear deal. Tighter sanctions could result in between 0.5-1.5mb/d [million b/d] of oil being pulled from the market,” he adds.

Goldman Sachs estimates that Brent will soar even higher in 2024 due to a “combination of supply constraints and steady demand growth”. In its latest macro-outlook report, the investment bank forecasts Brent to reach $88/bbl in three months, $92/bbl in six months and average at $93/bbl within a year.

Downward pressure:

Concerns over global supply shortages are slowly dissipating as non-OPEC producers gradually increase production, limiting Brent's price gain.

Global oil supply is “firmly on an upward trajectory,” said the International Energy Agency (IEA) in its November oil market report. This will be led by non-OPEC producers, IEA added. The IEA projects the US, Canada, Brazil and Guyana to produce a combined 1.7 million b/d more than they did this year in 2024.

Meanwhile, the IEA has also forecast global demand growth to slow down sharply to 930,000 b/d in 2024, from 2.4 million b/d this year.

The prospect of rising non-OPEC oil supply combined with a potential slowdown in demand has led hedge fund traders and money managers to reduce their long positions in Brent to the lowest level since late May. The Commitments of Traders report from the Commodity Futures Trading Commission shows that money managers reduced their long positions in Brent futures from 227,000 on 7 November to 223,000 on 14 November.

By Konica Bhatt

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