Oil prices post losses for the month and quarter on bets for a supply surplus

By Myra P. Saefong and William Watts

WTI, Brent crude fail to find support from growing Middle East tensions

Oil futures ended Monday with losses for the session, month and quarter, pressured by expectations that major oil producers will boost production in December - leading to a surplus of supplies as the outlook for demand remained uncertain.

Risks to global crude supplies in the oil-rich Middle East after a strike by Israel on Beirut that killed the leader of Iran-backed Hezbollah, however, helped to limit oil's price decline in Monday's trading session.

Price moves

West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 fell a penny to settle at $68.17 a barrel on the New York Mercantile Exchange. Front-month prices ended 7.3% lower for the month and lost 16.4% for the quarter, according to Dow Jones Market Data.November Brent crude BRNX24, the global benchmark, fell 21 cents, or 0.3%, at $71.77 a barrel on ICE Futures Europe on the contract's expiration day. Prices ended 8.9% lower for the month and lost 16.9% for the quarter. The more actively traded December contract BRN00 BRNZ24 added 16 cents, or 0.2%, on Monday to $71.70 a barrel.October gasoline RBV24 added 0.5% to $1.96 a gallon, but lost 11.3% for the month and 22.4% for the quarter, while October heating oil HOV24 shed less than 0.1% to $2.13 a gallon, ending the month with a loss of 5.3% and down 15.3% for the quarter. The October contracts expired at the end of the trading session.Natural gas for November delivery NGX24 settled at $2.92 per million British thermal units, up 0.7% for the session. It posted gains of 37.4% for the month and 12.4% for the quarter.

Market drivers

"Concerns over an oversupply of crude intensified after reports indicated that OPEC+ would proceed with its plans to increase production by 180,000 barrels per day starting in December," said Ernesto Di Giacomo, senior market analyst at XS.com.

"This decision could further widen the supply-demand imbalance, creating uncertainty among investors and putting downward pressure on prices in the short term," he said in emailed commentary.

Crude prices fell last week, with pressure tied in part to a Financial Times report, citing people familiar with Saudi officials' thinking, that said the kingdom was ready to throw in the towel on voluntary production cuts in December in a bid to reclaim market share.

However, the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, had already said in early September that they would start to gradually reinstate voluntary production cuts of 2.2 million barrels starting in December.

Still, Di Giacomo said risks of supply disruptions in the Middle East due to geopolitical conflicts in the critical crude-producing region are keeping investors "alert."

Hezbollah on Saturday confirmed that an Israeli strike had killed its leader Hassan Nasrallah, the latest and heaviest in a series of blows delivered by Israel against the Iranian proxy in recent weeks. A number of other top officials were also killed in the attack and subsequent strikes over the weekend. Israel also targeted a seaport and power plants in Yemen after Iran-backed Houthi rebels fired missiles toward Tel Aviv in recent days, news reports said.

"The oil market's response to developments in the Middle East over the weekend has been somewhat muted," Warren Peterson and Ewa Manthey, commodity strategists at ING, said in a note. "The market has become increasingly numb to the tension in the region given that, after almost a year of conflict, there has still been no impact on oil production."

The focus remains on Iran: If the country became involved in a more direct confrontation with Israel or the U.S., market attention would shift more decidedly toward the prospect of a supply disruption, the analysts wrote.

At the same time, OPEC is sitting on a large amount of spare production capacity, they said, which also provides the market with some comfort.

OPEC+'s Joint Ministerial Monitoring Committee will meet on Wednesday and may offer some clues to production plans.

The event is likely to have the "biggest potential impact for the oil market," with traders looking for "whether the countries remain committed to production cuts or if there are cracks in their solidarity emerging," said Colin Cieszynski, portfolio manager and chief market strategist at SIA Wealth Management. "In particular, whether Saudi Arabia confirms or rejects recent rumours, that it may be looking to break ranks and start increasing production to regain market share, could have a significant impact on oil pricing."

Associated Press contributed.

-Myra P. Saefong -William Watts

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09-30-24 1532ET

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