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The OPEC+ group of 23 oil producing countries is expected to roll over its current oil policy when it meets on Sunday, meaning the group would not deepen production cuts past the 2M bbl/day reduction it ordered in October, but some prominent market watchers say a further cut is possible given concerns about economic growth and demand.
OPEC+ reportedly is hoping to assess how the $60/bbl price cap on Russian seaborne oil will affect markets after it takes effect Monday, and to get a clearer picture of demand in China, which has struggled to reopen its economy as planned due to a resurgence of COVID-19 cases.
“In view of the many uncertainties on the market, [OPEC] is unlikely to implement any further measures this Sunday,” Commerzbank’s Barbara Lambrecht said.
Analysts at J.P. Morgan said OPEC+ likely will hold the line on production while leaving the door open to another 500K bbl/day cut if demand deteriorates further.
The group “would be better off to stay the course” and roll over existing production policy, Rystad’s Claudio Galimberto told CNBC.
But Goldman Sachs’ global head of commodities Jeff Currie sees a “high probability” of a cut to account for continued weakness in demand from China.
RBC Capital’s Helima Croft sees no expectation of an increase from the OPEC+ meeting and a “significant chance” of a deeper output cut.
The effects of the 2M bbl/day October oil cuts were offset by a production rise from Russia – an OPEC+ member – to 10.9M bbl/day in November, causing the group’s overall reduction to average just 361K bbl/day, Bloomberg reported.
Front-month Nymex crude (CL1:COM) for January delivery closed +4.8% for the week to $79.98/bbl while February Brent crude (CO1:COM) ended +2.2% to $85.57/bbl, with both benchmarks snapping three-week losing streaks.
ETFs: (NYSEARCA:USO), (NYSEARCA:UCO), (BNO), (SCO), (DBO), (USL), (USOI), (NRGU)
Energy (XLE) was the week’s worst performing S&P 500 stock market sector, -1.7%.
Top 5 gainers in energy and natural resources during the past 5 days: (TOPS) +81.2%, (HTOO) +39.6%, (NFGC) +32.6%, (CORR) +19.8%, (IE) +19.5%.
Top 10 gainers in energy and natural resources during the past 5 days: (SLDP) -28.5%, (NRGV) -27.8%, (KNOP) -26.6%, (PBF) -19.7%, (OGS) -17.5%, (VTNR) -16.3%, (STEM) -14.6%, (DK) -14.3%, (PEGY) -14.2%, (CVI) -13.8%.
Source: Barchart.com
