DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange (NYMEX) and the front-month Brent contract on the Intercontinental Exchange settled Monday's session with sharp gains. contracts continued an advance from 4 1/2-month lows on reports the Organization of the Petroleum Exporting Countries (OPEC) and 13 non-OPEC producers aligned with the cartel are considering production cuts.

OPEC+ meets Nov. 26 to discuss production quotas and adherence to previous targets during its biannual meeting. Reports emerging over the weekend indicate OPEC+ will consider a 1 million barrel per day (bpd) cut in its combined output distributed equally among members. Reports indicate Saudi Arabia will maintain a unilateral 1 million bpd production cut into spring 2024, continuing the voluntary reduction that began in July to shore up oil prices.

Oil prices came under pressure in November amid easing supply worries as oil production by non-OPEC+ countries grew more quickly than expected, namely the United States, Brazil and Guyana. The most recent Short-Term Energy Outlook by the Energy Information Administration projects fourth-quarter global oil production at 102.05 million bpd against world consumption forecast at 101.85 million bpd.

West Texas Intermediate (WTI) was provided an additional boost by a weakening U.S. dollar, which fell to an 11-week low in index trading against six global currencies. The U.S. Dollar Index settled down 0.46% at 103.317, the lowest settlement since Aug. 30, under pressure from expectations the Federal Reserve has completed its monetary tightening cycle through increases in the federal funds rate.

December WTI futures expired up $1.71 at $77.60 a barrel (bbl), with the January contract settling the session at a $0.23 bbl premium to the now-expired contract. Backwardation in the U.S. crude market structure continues to unwind on easing concerns over supply availability, with the six-month calendar spread ending the session $0.41 backwardated. On Sept. 27, it was $10.09 bbl, with low inventory at the Cushing tank farm in Oklahoma, the WTI delivery point, which was nearing minimum operating levels and adding to market anxiety. Cushing crude oil supply increased 3 million bbl from late September to early November, last counted at 25 million bbl. Moreover, Cushing crude stocks are seen building amid returning oil production in Canada.

ICE January Brent futures settled $1.71 higher at $82.32 bbl with the February contract near parity at $82.34 bbl. Brent's six-month calendar spread ended the session flat at $1.01 bbl backwardation, well below a late September peak of $9.33 bbl.

NYMEX December ULSD futures settled $0.077 higher at $2.8495 gallon, with the December RBOB contract capturing a $0.0415 gain with a $2.2260 gallon settlement.

Brian L. Milne can be reached at brian.milne@dtn.com.