Oil steadies, but heads for losing week on prospect of increased supply

By William Watts

Oil futures ticked higher Friday, but remained on track for weekly losses on expectations OPEC+ will boost production before year-end as investors cast doubt on whether an aggressive round of monetary stimulus from China will shore up demand from the world's largest crude importer.

Price moves

West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 rose 14 cents, or 0.2%, to $67.79 a barrel on the New York Mercantile Exchange, n track for a weekly drop of 4.5%.November Brent crude BRNX24, the global benchmark, was up 13 cents, or 0.2%, at $71.73 a barrel on ICE Futures Europe. The more actively traded December contract BRN00 BRNZ24 gained 13 cents, or 0.2%, to $71.22 a barrel, down 3.3% for the week.

Market drivers

Crude was consolidating after a Thursday selloff that followed a Financial Times report, citing people familiar with Saudi Arabian officials' thinking, which said the kingdom was ready to throw in the towel on voluntary production cuts in December in a bid to reclaim market share.

Saudi Arabia and seven other members of OPEC+ - made up of the Organization of the Petroleum Exporting Countries and its Russia-led allies - had been set to begin unwinding some production cuts in October, but previously agreed to delay the move until December.

Attention will shift to a meeting of OPEC+'s Joint Ministerial Monitoring Committee next week, though it's unlikely to result in any major announcements, said Helima Croft, head of commodity research at RBC Capital Markets, in a note. She argued that the "direction of travel" is likely to depend on whether Iraq and Kazakhstan, which have overproduced, bring production back in line with assigned cuts.

"If these two producers make visible curtailments, we think Saudi Arabia and its regional partners will stick with the slow phase-in announced in June. However, if they fail to comply, we can envision a swifter sunsetting of the voluntary cuts," she said.

Fundamentally, the expected increase in production couldn't come at a worse time as demand expectations have faltered amid volatile economic data and growing uncertainty about a recession, said analysts at Sevens Report Research.

"The current 2024 low close of just over $66 a barrel will remain a key technical level to watch near-term as any negative news regarding the health of the economy has the potential to put more pressure on oil," they wrote.

-William Watts

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09-27-24 0747ET

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