Oil futures: Crude rebounds after Saudi pushes back on output hike report

21 Nov 2022

Quantum Commodity Intelligence - Crude oil futures rebounded Monday having tested 10-month lows after Saudi Arabia dismissed a report carried by the Wall Street Journal suggesting OPEC+ was considering a production increase when it next meets.   

Front-month January ICE Brent futures were trading at $86.65/b (1735 GMT), compared to the day's low of $82.31/b and Friday's settle of $87.62/b, as prices tested new lows after US markets opened.  

Jan23 NYMEX WTI was trading at $79.44/b, versus a low of $75.27/b and Friday's settle of $80.11/b. Dec22 was trading at $78.35/b ahead of expiry.

OPEC is scheduled to meet in early December, with the recent price collapse initially prompting speculation the producer group could announce a further cut to quotas, although the WSJ said Monday that Saudi could in fact push for a raise in output levels in a bid to pacify the Biden Administration.   

However, prices rebounded after Saudi state media issued a statement on behalf of the oil minister, saying OPEC+ does not discuss any decisions ahead of a meeting.
"It is well known, and no secret, that OPEC+ does not discuss any decisions ahead of its meetings. The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023 and if there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene," said Prince Abdulaziz bin Salman.


Sentiment remained negative as China reported more than 24,000 new Covid cases on Sunday, including in the southern manufacturing hub of Guangzhou, which accounted for one-third of the cases, while Beijing reported more than 600.

"Sentiment in the market clearly remains negative as demand concerns weigh on prices. These concerns are driven by the Covid situation in China, along with a gloomier global macro outlook," said Warren Patterson, head of ING's commodity research.

Last week, the IEA and OPEC further cut demand forecasts for next year, citing weak economic growth.

Banks also continued to mark down outlooks as Goldman Sachs cut its Q4 Brent forecast to an average of $100/b versus a previous expectation of $110/b.

Looking ahead to the rest of the week, traders will be watching for further clarity on the G7 price cap for Russian oil on Wednesday, including the level at which the group intends to set the cap.

EU energy ministers will meet on Thursday to try to move closer towards an agreement on their latest energy measures for the region, including joint purchases and price volatility management, noted ING.

Meanwhile, several Fed officials are scheduled to speak this week, ahead of a key speech by Chair Jerome Powell on 30 November that will define the outlook for rates at the December policy meeting. US markets will be closed Thursday and Friday for Thanksgiving.