Oil Prices Dip As OPEC+ Showdown Over African Quota Dispute Fuels Market Uncertainty

Global energy prices fell on Monday, with Brent crude dipping back below $80 a barrel after OPEC+ rescheduled its meeting — originally planned for Sunday — to later this week.

In early trade, Brent crude was down 1.2% at $79.50 a barrel, while Nymex West Texas Intermediate fell 1.2% to $74.61 a barrel. The United States Oil Fund USO, an exchange traded product that tracks the price of light sweet crude, was down 1.7% in pre-market trade at $69.60.

OPEC+, the 13 permanent members of the oil producing cartel plus allies including Russia, will meet on Thursday to discuss output quotas. Given Monday’s price action, oil traders appeared to be backing the likelihood that very little will change in a market that is currently amply supplied.

“Global energy markets have been flooded with supply so far in November, which coincided well with lower demand across the gas and oil complex,” said Joe DeLaura, global energy strategist at Rabobank.

Also Read: Crude Oil Prices Fall As OPEC+ Meeting Postponed Over Angola And Nigeria Spat

US Stockpiles Surge On Record Production

Last week’s U.S. crude oil inventories data showed a larger-than-expected build in stockpiles of 8.7 million barrels thanks to stronger imports and record high domestic production of 13.2 million barrels a day. Consensus expectations was for a build of 100,000.

DeLaura added that demand was being affected by warmer weather than usual for key markets in the Northeast region.

Warmer weather also affected the price of gas, with U.S. Natural Gas Futures down 4.2% at $2.872 per million British thermal units. The First Trust Natural Gas ETF FCG, an exchange traded fund that tracks the performance of the ISE-Revere Natural Gas Index, was down 2.6% at $24.36.

The OPEC+ meeting was rescheduled from Sunday after the group was delayed by a dispute with African producers Nigeria and Angola over their current quotas, which both countries claimed were too low. OPEC+ said over the weekend that the discussions were close to resolution, which likely means more supply from Africa will hit the markets in the coming weeks.

Russia And Saudi Could Go It Alone On Deeper Cuts

At Thursday’s meeting, some inside sources have reported, Saudi Arabia and Russia will be looking to expand production cuts by a further 1 million barrels a day over the 5 million b/d curbs already in place.

“Clearly, if we do not see this, it would put further downward pressure on the market, given the surplus over 1Q24. We believe that the Saudis will roll over this cut and there is a growing possibility that we see a deeper cut from the broader group,” said Warren Patterson, head of commodities strategy at ING.

Markets have remained bearish for some time, however. Brent crude ended last week only fractionally lower, but it marked the fifth-consecutive week of losses. Since its 2023 peak of $97.69 in September, Brent has fallen by 18.5%.

DeLaura added: “We expect a continuation of current supply cuts would be slightly bearish for Brent and WTI in the near term, while further cuts would see a small spike in prices, but also signal to the market that the weak demand and global macro deterioration is being recognized.”

Now Read: Fat Profits Of Exxon, Chevron & Co. To Get Fatter?

Photo: Shutterstock