Oil futures: Crude steadies ahead of OPEC+ output decision

31 Oct 2024

Quantum Commodity Intelligence – Crude oil futures Thursday inched higher as benchmarks held on to recent gains following Monday's rout.

Front-month Jan25 ICE Brent futures were trading at $72.56/b (1746 GMT), compared to Wednesday's settle of $72.16/b, while the Dec25 contract was trading at $73.07/b heading into the expiry.

At the same time Dec24 NYMEX WTI was trading at $69.09/b versus Wednesday's settle of $68.61/b.

Prices recovered from monthly lows as sentiment turned slightly more upbeat amid speculation that OPEC+ could defer planned December hikes, along with improved demand signals from the US and possibly China.

"Oil prices are buoyed by optimism around US fuel demand after an unexpected drawdown in crude and gasoline inventories. Add in hopes for a China-driven stimulus surge and rumors that OPEC may push back its production increases, and you've got a recipe for some short-term buoyancy in oil," said Stephen Innes of SPI Asset Management.

Latest off-the-record media briefings from OPEC delegates indicated that the group was considering a further delay in implementing output hikes, with the broader OPEC+ group due to decide in the next few days – including the possibility of a weekend announcement to blunt market volatility.

Stimulus

Broader commodities markets were also given a lift on reports that China is poised to announce a further round of stimulus measures.

According to a Reuters report, Beijing could approve a major new fiscal stimulus package at a meeting by China's top legislative body on 4-8 November.

Wednesday's EIA data also lifted sentiment as crude stockpiles dipped 500,000 barrels, going against pre-release expectations for a build of around 2 million barrels.

US gasoline inventories also tumbled to fresh two-year lows last week as demand topped 9 million bpd again after a volatile few weeks dominated by US Gulf hurricanes.

However, some analysts see further oil-price upside as limited, with markets still facing a supply/demand imbalance next year unless OPEC+ keeps a lid on output at the expense of market share.

"From a purely fundamental perspective, Brent oil in the low $70s is appropriately priced, since the oil market is sufficiently supplied and there is a looming oversupply in the coming year," said Carsten Fritsch of Commerzbank.