DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil prices tumbled about 2% in Monday morning trade ahead of a monthly OPEC meeting later this week where further production hike commitments were expected to add to oversupply concerns.

The return of northern Iraq exports to the market after a two-and-a-half year hiatus added to the weight on prices.

In crude oil, NYMEX-traded WTI for November delivery fell $1.30, or 2%, to $64.42 barrel (bbl). ICE Brent for November delivery retreated $1.22, or 1.7%, to $68.91 bbl.

Among oil products, October RBOB gasoline futures slid $0.0154 to $1.9734 gallon, and the front-month ULSD contract fell $0.0494 to $2.3795 gallon.

The U.S. Dollar Index remained little changed at 97.582, down 0.242 points against a basket of foreign currencies.

Over the weekend, flows along the Kirkuk-Ceyhan pipeline resumed after a two-and-a-half year long halt, delivering oil from northern Iraq to Turkish export terminals. At least 200,000 barrels per day (bpd) of crude oil are likely to return to the market immediately.

Before the shutdown, flows on the pipeline averaged more than 400,000 bpd, but lacking takeaway capacity has dented Kurdish production capacity since the interruption.

On Wednesday (10/1), OPEC delegates will be convening virtually to set production policy for November. Last month's meeting resulted in a quota hike of 137,000 bpd for October. While that was only a quarter of prior monthly increases, it still took market observers by surprise given that the hikes were part of the unwinding of some 2.2 million bpd in voluntary additional production curtailments shouldered by eight member states, something which had been achieved in September.

Wednesday's meeting is expected to result in yet another quota increase as OPEC+ tries to regain lost market share, which risks further tilting the global oil balance into oversupply. Actual production hikes are likely to come in below target, as evidenced by the group's history and waning spare production capacity.