Oil futures: Crude extends gains on OPEC-cut talk, geopolitical tensions

Quantum Commodity Intelligence – Crude oil futures Monday were sharply higher, extending the previous session's 4% rebound on growing expectations that OPEC+ will at least maintain current policy into the new year while considering a further round of cuts.

Front-month Jan24 ICE Brent futures were trading at $82.82/b (1755 GMT), compared to Friday's settle of $80.61/b.

At the same time Jan24 NYMEX WTI was trading $78.34/b, versus Friday's settle of $76.04/b, while Dec23 last traded at $78.05/b heading into the expiry.

Prices had rebounded from around four-month lows Friday on reports that OPEC+ is considering deeper cuts at the 26 November meeting in Vienna, which would come as additions to reductions already in place.

"While baseline forecasts are coalescing around the idea the existing group production cuts will stay the course in 2024 and that the unilateral Saudi cut of 1 million bpd will be extended through 2024Q2, the key question, given the rise in Non-OPEC production is whether OPEC+ will deliver deeper cuts," said Stephen Innes, managing partner SPI Asset Management.

Last week's IEA report flagged growing supplies from non-OPEC members, particularly the Americas, which analysts have said may need to be countered by continued OPEC+ action.

However, Saudi is unlikely to take further action with support from other producers and assurances over compliance.

The IEA sees record output from the US, Brazil and Guyana underpinning this year's 1.7 million bpd in global oil supplies, while non-OPEC supply continues to lead growth of around 1.6 million bpd next year to a record 103.4 million bpd.

Red Sea

Meanwhile, geopolitical tensions ratcheted up after Yemen's Houthi rebels seized an Israeli-linked cargo ship on the critical Red Sea shipping lane, according to Israeli officials, while further attacks on shipping were flagged by the Iran-backed group.

"All ships belonging to the Israeli enemy or that deal with it will become legitimate targets," a Houthis spokesman said.

The Israel-Hamas conflict is seen as a potential flashpoint for oil markets, with the wider region playing host to three of the world's most important transit points – namely the Strait of Hormuz, the Bab-el-Mandeb Strait, and the Suez Canal/Sumed pipeline.

The Bab-el-Mandeb chokepoint, which lies to the south of the Suez Canal and the Red Sea, is a major transportation route for oil tankers.

Elsewhere, the Xinhua news agency reported that China kept its benchmark loan prime rate at record lows on Monday while rolling out more liquidity programmes to boost the economy, including the People's Bank of China conducting a CNY 205 billion ($28.6 billion) injection.