Oil futures: Brent reverses earlier losses, shrugs off fund selling

Quantum Commodity Intelligence – Crude oil futures Monday were higher following a late rally after benchmarks initially struggled to consolidate the previous session's cautious recovery, which came amid improved optimism that OPEC+ would be able to deliver on pledged additional cuts for Q1.

Front-month Feb24 ICE Brent futures were trading at $76.31/b (1820 GMT) compared to the day's range of $75.01-$76.50/b and Friday's settle of $75.84/b.

At the same time, Jan24 NYMEX WTI was trading $71.65/b versus Friday's settle of $71.23/b.

Oil benchmarks had racked up a seventh week of declines, but a 2% rebound on Friday moderated weekly losses to around 3.5% after a joint statement from Saudi Arabia and Russia called on OPEC+ members to enforce output cuts helped to steady markets.

OPEC+ members announced additional voluntary cuts totalling around 900,000 bpd in late November, which come on top of the existing 1.3 million bpd voluntary cuts already in place, but there had been doubts over compliance levels.

Prices were also buoyed Friday after a survey published by S&P Global showed OPEC+ production had already eased in November, albeit at a relatively slim rate of 110,000 bpd on the month, with Iraq making the largest contribution.

However, analysts cautioned it was too early to call a halt to the downward pressure, while markets are likely to remain volatile as investors look to this week's IEA and OPEC reports for further clues on the demand outlook for 2024.

"The market has fallen over doubts on support from OPEC+ after the voluntary cuts, which, combined with record non-OPEC production and weak Chinese crude oil import figures, points to an abundance of oil in the market," said City Index analyst Fiona Cincotta, referring a seventh week of declines, noting both benchmark contracts are trading in contango.

Investors

Oil futures initially took a blow Monday after Exchange data revealed combined net length on WTI and Brent futures sank to their lowest in more than ten years in the aftermath of the OPEC+ meeting, with traders unconvinced that the pledged cuts will be enough to compensate for lower oil demand next year.

Investors sold around 7.1k long contracts on ICE Brent crude in the week to 5 December and bought the largest amount of short contracts since the middle of May at just under 19k. That pushed the net length of Brent crude down 26k contracts or 16% to a seven-month low of 138.8k contracts.  

Oil markets were given a brief lift after US job creation slightly outpaced expectations as nonfarm payrolls increased by a seasonally-adjusted 199,000 for the month, beating the 190,000 Dow Jones forecast.

However, economic data from China continues to disappoint as the consumer price index fell 0.5% year-on-year, the steepest drop since November 2020.