DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange softened on Monday, although all petroleum contracts moved off intrasession lows following reports suggesting Saudi Arabia and Russia seek deeper production cuts from the rest of the OPEC+ alliance to strengthen market fundamentals in the winter months.

Riyadh has unilaterally cut production by 1 million bpd since mid-summer, pressing its output to a decade-low 9 million bpd. In coordination with Russia and other OPEC+ members, Saudi Arabia removed nearly 5 million bpd from the physical market so far in the second half of 2023, but that still hasn't stopped a slide in oil prices. Brent, the international crude benchmark, has fallen more than 18% since September's high $97.69 bbl and the backwardation in the six-month calendar spread has narrowed sharply in a sign of a well-supplied physical market.

U.S. commercial oil stockpiles, often used as a proxy for global inventory level because of their transparency, increased in each of the past five weeks through Nov. 17 contrary to expectations for drawdowns, building by a sizable 28 million bbl. Domestic oil production, meanwhile, held at a record-high 13.2 million bpd since the first week of October.

Faced with these headwinds, Saudi Arabia and Russia are reportedly lobbying other OPEC+ members to more deeply cut their production to backstop against a further slide in oil prices. However, the group's marginal producers, namely Nigeria and Angola, reportedly oppose a lower production ceiling, stalling an already difficult negotiations process to reach a new production agreement for next year.

Under the terms of OPEC+ agreement from June 4, Nigeria and Angola already conceded to lower their production targets until further revision in exchange for a higher output ceiling for the United Arab Emirates. UAE is scheduled to raise its production by 200,000 bpd beginning on Jan. 1, 2024, to 3,219 million bpd.

Production capacities for Nigeria and Angola are up for revision at the end of 2023 based on assessments from three independent consultants -- IHS, Wood Mackenzie, and Rystad Energy, in order to identify their production plans for 2024. Since early June, both African producers managed to raise their crude output, but production has remained below agreed-to quotas for most of 2023. The situation remains fluid.

OPEC+ delayed its biannual Meeting of the Joint Ministerial Monitoring Committee scheduled for Saturday (11/25) and the 36th OPEC and non-OPEC Ministerial Meeting scheduled for Sunday to Thursday (11/30).

At settlement, January WTI futures retreated $0.68 bbl to $74.86 bbl, with the prompt spread in a $0.25 bbl contango. Brent for January delivery fell $0.60 bbl to settle a tad below $80 bbl at $79.98 bbl, and next-month February delivery expanded the discount to prompt delivery to $0.11 bbl.

NYMEX December ULSD futures edged $0.0022 higher to settle at $2.8379 gallon, with the December RBOB contract adding $0.0148 to $2.1799 gallon.

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