DTN Oil

WASHINGTON, D.C. (DTN) -- After Thursday's steep selloff sent oil futures into a bear market, West Texas Intermediate (WTI) on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange retraced most of the losses on Friday, rallying 4% as the U.S. dollar index pulled back and traders looked ahead to the meeting among OPEC+ ministers that could deliver deeper production cuts to their supply accord.

Despite Friday's rebound, the oil complex failed to break a four-week losing streak, with both WTI and Brent contracts falling more than 20% since their September highs. In technical terms, the oil market has entered a bear market.

A combination of rising inventories in the United States, lower refinery runs in China and production gains outside of OPEC+ prompted investors to broadly reassess fundamentals in the physical oil market. Furthermore, the unwinding of geopolitical risk premium tied to the Oct. 7 surprise attack by Hamas on Israeli civilians added to bearish sentiment.

This week's Energy Information Administration inventory report exacerbated the collapse of oil prices on Thursday, revealing commercial crude oil inventories in the U.S. increased by a massive 19.6 million barrels (bbl) in the four weeks ending Nov. 10. Domestic oil production, meanwhile, remained at a record high 13.2 million barrels per day (bpd).

Faced with these headwinds, OPEC+ ministers are reportedly considering deeper production cuts when the group meets on Nov. 26, according to a Reuters report citing sources close to negotiations.

Saudi Arabia, Russia and other OPEC+ producers have already pledged to extend a total of 3.66 million bpd in production cuts through the end of 2024. Additionally, Russia, and Saudi Arabia, the group's two largest producers, agreed to a voluntary 1.3 million bpd in production and export reductions through year's end.

One OPEC+ source cited in the Reuters report said the existing curbs might not be sufficient to backstop volatility in the market and that the group would likely analyze if deeper cuts could be implemented.

On the macroeconomic front, the number of Americans filing for initial unemployment claims jumped to a three-month-high 231,000 in the most recent week after rising for each but one of the past five weeks, according to data released Thursday from the U.S. Labor Department. Continued jobless claims, a proxy for the number of Americans receiving unemployment benefits on a recurring basis rose to a two-year-high 1.87 million in a clear sign of a growing slack in the labor market.

It's worth noting that U.S. consumer sentiment has taken a beating in recent weeks as American households struggle to handle higher interest rates and inflationary pressures simultaneously. Combined with moderation in consumer spending, a softer labor market doesn't bode well for U.S. gasoline demand heading into the holiday season.

The most recent data from the U.S. Energy Information Administration showed gasoline demand nosedived 544,000 bpd for the first week of November to 8.949 million bpd, 103,000 bpd or 1.2% below last year's level.

At settlement, NYMEX December WTI futures rebounded $2.99 to $75.89 bbl, with January WTI holding its premium against the front-month contract at $0.15. Lending support to the WTI contract, the U.S. dollar retreated 0.42% against a basket of foreign currencies to 103.795. ICE January Brent futures jumped $3.19 to $80.16 bbl and the next month's February contract settled the session at $80.50 bbl.

NYMEX December RBOB futures added $0.0834 to $2.1845 gallon and NYMEX December ULSD futures gained $0.0223 to $2.7725 gallon.

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