Oil futures: Brent off highs as OPEC+ set for rollover, lower Russian price cap

1 Dec 2022

Quantum Commodity Intelligence - Crude oil futures Thursday were firmer although off from the day's highs as expectations increasingly pivot towards an OPEC+ rollover when the producer group meets virtually over the weekend.

Front-month February ICE Brent futures were trading at $87.02/b (1955 GMT), compared to the high of $89.37/b and Wednesday's settle of $86.97/b.  

At the same time, Jan23 NYMEX WTI was trading $81.33/b versus Wednesday's settle of $80.55/b.

The Russian price cap and sanctions kick in the day after the OPEC meeting and analysts are increasingly swayed towards the group taking a wait-and-see stance.

"OPEC will, at the very least, rollover their previous production cuts... because they canceled the JTC and have changed from an in-person to a virtual meeting, expectations are they will not want to do anything out of the ordinary and just stay the course," said Phil Flynn of The Price Futures Group.

Latest reports indicated EU states are close to agreeing a price ceiling for Russian crude oil at $60/b to help secure an agreement.

At the lower price ceiling, analysts say it is more likely that Russian exports will drop off heading into the new year. 

Meanwhile, China signalling a shift in its Covid stance as it moves to ease some virus restrictions underpinned the rebound in oil prices this week.  

"The pent-up demand out of China is going to be enormous," said Amrita Sen, director of research for Energy Aspects. "That could swing demand by at least a million barrels a day, and that could easily make the difference between an oil price forecast of $95 to $105 versus $120 to $130. Easily."

The EIA's weekly inventory report was also supportive, as data showed that US commercial crude oil stocks fell by over 12m barrels, the largest weekly decline since June 2019. 

US Federal Reserve Chair Jerome Powell said on Wednesday it was time to slow the pace of coming interest rate hikes, which market watchers said could support oil prices.