DTN Weekly Oil Update
Oil Futures Advance as OPEC-Plus Postpones Large Output Hike
VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied Monday morning, following an announcement by OPEC+ to again push back a planned output hike.
OPEC+ producers who shouldered an additional 2.2 million barrels per day (bpd) in production cuts postponed their plans to return production once more. Initially planned to end in October, the group on Sunday decided to extend these voluntary cuts into December. Weak demand among main OPEC crude oil consumers, particularly in East Asia, has been weighing on oil prices since the spring and dimmed global demand growth outlooks.
OPEC had banked on Chinese oil demand growth this year, which all but failed to materialize in any meaningful way. Official government data show less crude oil processing and lower imports than last year as the country's industrial sector experienced little growth, domestic consumption stayed behind expectations and regional demand for refined products softened. China's official manufacturing PMI in October broke the 50-mark for the first time since April, at 50.1, finding itself barely in expansion territory. The Caixin manufacturing PMI in October at 50.3 also suggested slight growth, up from 49.3 in September. Caixin's index, which in the first half of the year pointed to solid growth, has been hovering around the 50-mark for the past four months. The Chinese government has until recently been reluctant to embrace meaningful stimulus measures, so far mostly opting for small cuts to interest rates. The Standing Committee of the National People's Congress, however, which is meeting all week, is now expected to draft new and additional stimulus measures.
Barring a Middle Eastern war disrupting oil production and exports, the return of Libyan production and ever-growing non-OPEC oil output may leave the producer group in no better spot to hike output next month -- with or without Chinese stimulus.
Near 8:15 a.m. EST, WTI for December delivery was trading near $71.43 barrel (bbl), up $1.94, and Brent for January delivery was up $1.88 near $74.98 bbl. December RBOB rose $0.0564 gal to $2.0229, and December ULSD gained $0.0478 gal to $2.2820.
Karim Bastati can be reached at karim.bastati@dtn.com
