Oil futures: Crude rebounds from monthly lows, OPEC+ in focus

30 Oct 2024

Quantum Commodity Intelligence – Crude oil futures Wednesday staged a healthy rebound, as benchmarks found some support from speculation on OPEC+ policy after the early week slump.

Front-month Dec24 ICE Brent futures were trading at $72.31/b (1800 GMT), compared to Tuesday's settle of $71.12/b, while the more-liquid Jan25 contract was trading at $71.92/b.

At the same time Dec24 NYMEX WTI was trading at $68.36/b, versus Tuesday's settle of $67.21/b, also rebounding from October lows after Monday's 6% slide.

Prices climbed higher as investors went into OPEC-alert mode, with the producer group and allies set to decide whether to press ahead with planned OPEC+ production increases from December.

The latest round of off-the-record media briefings indicated that the group was considering a further delay, but the length of any potential postponement will be the key for prices.

A short delay was seen as unlikely to move the needle, but keeping barrels off the market for a longer period would address concerns over the Q1 supply/demand imbalance, said analysts. 

The unwinding of the risk premium following Israel's limited retaliatory attacks on Iran over the weekend had left benchmarks floundering at the low end of the three-year trading range while global supply/demand balances have come back into focus.

"The aftermath and retaliatory rhetoric from politicians in both countries have fuelled speculation that both sides are trying to avoid escalation for now. As a result, the geopolitical risk premium has fallen sharply," said Alexander Kuptsikevich of FxPro, noting that prices initially returned to levels prior to the latest escalation in the Middle East.

Reports that regional ceasefire talks were making progress added to earlier bearish pressure as senior officials held talks to find a solution to the conflict in Lebanon, while Israel's finance minister said the war with Hezbollah would likely end this year.

Pivot

Focus has pivoted back to the 2025 demand outlook amid ongoing concerns of a slowdown in the global economy.

The latest Chinese stimulus package has so far disappointed, while Western economies gradually easing interest rates could take months to be felt across the real economy.

Geopolitical events have again largely overshadowed the latest inventory report from the American Petroleum Institute, which revealed a 573,000-barrel draw in crude stockpiles, going against expectations for a build of over 2 million barrels.

However, Wednesday's report from the Energy Information Administration (EIA) gave prices a slight lift after commercial crude stockpiles dipped by 515,000 barrels, going against pre-release expectations for a build of around 2 million barrels.

US gasoline inventories, meanwhile, dropped to new two-year lows last week as demand topped 9 million bpd again after a volatile few weeks dominated by US Gulf hurricanes.