Oil futures dropped on Tuesday, reversing significant gains gained in the previous two trading days, as investors turned cautious ahead of a meeting of OPEC+ this coming Sunday, at which the producer group may explore expanding supply curbs.
By 06:30 GMT, Brent crude futures had fallen 64 cents, equivalent to 0.8%, to $81.68 a barrel, while U.S. West Texas Intermediate crude futures had fallen 62 cents, equivalent to 0.8%, to $77.21 a barrel.
Both futures increased by almost 2% on Monday after three sources within OPEC+ told Reuters that the group, which is comprised of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, was planning to discuss whether or not to implement extra oil production curbs during its meeting on November 26.
On Tuesday, the gains were reduced to a smaller amount. “Investors took a wait-and-see attitude to confirm the OPEC+ decision,” said Tsuyoshi Ueno, senior economist at the NLI Research Institute.” Eight analysts have concluded that OPEC+ will likely continue or expand oil supply cutbacks into the following year.
Analyst Helima Croft from RBC Capital commented: “We see some scope for the group to do a deeper reduction, but we would anticipate that Saudi Arabia would seek additional barrels from other members to share the burden of the adjustment.”
She said in a note that reopening the quota agreements made in June could be difficult and lead to drawn-out negotiations; as a result, the leadership may look for more voluntary modifications from individual producers.
A trader headquartered in Singapore stated that the market has partially factored in the possibility of additional action from OPEC and its allies beyond a rollover of the existing cuts.
Since late September, oil prices have fallen by almost 16% because crude output in the United States, the world’s top producer, has held record highs. In addition, the market has been concerned about the rise in demand, particularly from China, the world’s largest oil importer.
Traders were also waiting for signs of demand destruction from a likely U.S. recession in 2024 and considering Walmart’s (WMT.N.), the largest retailer in the United States, warning about the possibility of deflation from the previous week.
A preliminary survey conducted by Reuters on Monday showed that crude and gasoline stockpiles in the United States likely increased during the previous week while distillate inventories decreased. The American Petroleum Institute and the Energy Information Administration are anticipated to release their weekly stockpile reports on Tuesday and Wednesday, respectively.
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