Oil Futures Waver With OPEC+ Meeting, Saudi OSPs in Focus

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved in narrow ranges in early trade Monday as traders searched for direction ahead of a highly-anticipated meeting among Organization of the Petroleum Exporting Countries and Russia-led partners later this morning where the alliance is set to decide on production increases for November amid signs of a rapidly evolving energy crisis in China and the European Union.

Saudi's national oil company, Aramco, is expected to trim its official selling prices for crude oil for Asian buyers for the second consecutive month in November after China's power crunch forced industrial and transportation sector there to reduce operations. Over the weekend, several provincial governments in China rolled out various electricity rationing measures to conserve fuel ahead of the peak winter demand season. Several banks in recent weeks lowered China's growth forecast for this year toward or even below 8%, citing widespread power outages and depleted fuel inventories. At the very least, near-term industrial fuel demand will take a deep cut this winter with construction and transportation sectors being forced to adhere to power-usage caps. China's manufacturing purchasing managers index fell into contraction last month to the lowest point since the beginning of the pandemic in February 2020.

Against this backdrop, Saudi Aramco is seen cutting its November official selling prices for Asia-bound crude by at least 20 cents per barrel (bbl) after discounting it by more than a $1/bbl in October.

The price moves come ahead of Monday's meeting among OPEC+ ministers that previously agreed to boost their collective supplies by 400,000 barrels per day (bpd) in November, gradually easing the remainder of historic production cuts put in place in March 2020. Currently, the alliance withholds about 4.6 million bpd from the global oil market, with consensus calling for the producers to stick to their agreement despite global fuel shortages.

"Our base case expectations for Monday's OPEC meeting is that OPEC continues with its existing agreement to unwind its production cuts by around 400,000 bpd each month," Morgan Stanley said in a note to clients.

Even still, OPEC+ could surprise markets by releasing more supplies next month to ease price pressures. Last week, several OPEC+ sources stated the group has considered various scenarios for November's production hike, although none gave specifics on how much more or when it may happen.

Ihsan Abdul Jabbar, Iraq's oil minister, stated that oil prices of $100 per barrel were unsustainable, and that OPEC desired stable markets.

Furthermore, India -- a major oil consumer, indicated that a spike in crude prices would undermine demand for oil growth and speed up the transition to alternative energy sources.

In broader markets, U.S. dollar slid along with futures contracts tied to Dow Jow Industrials as investors monitor partisan bickering over raising the $28.4 trillion debt ceiling. Treasury Secretary Janet Yellen told both the House of Representatives and Senate last week that the government would effectively run out of money on Oct. 18 if the debt ceiling isn't lifted. Senate Republicans twice last week blocked bills to raise the debt ceiling in the evenly divided upper house. Senate minority leader Mitch McConnell has told Democrats to use the budget reconciliation process to increase the debt ceiling, which is a special parliamentary procedure that can be used for certain budgetary legislation.

In early trade, NYMEX November West Texas Intermediate futures traded unchanged near $75.89 bbl, and ICE December Brent contract edged higher to near $79.40 bbl. NYMEX November ULSD futures slipped 0.13 cents to $2.3814 gallon and the front-month RBOB futures declined 0.88 cents to $2.2412 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges