Oil futures: Brent up 4% as OPEC+ flags steeper output cuts
Quantum Commodity Intelligence – Crude oil futures Monday were higher after various media briefings over the weekend from OPEC+ delegates indicated a significant output reduction, as the producer alliance looks to arrest the price retreat in the face of global recession fears.
Front-month December ICE Brent futures were trading at $88.80/barrel (1830 GMT), compared to Friday's settle of $85.14/b.
At the same time Nov22 NYMEX WTI was trading $83.58/b, versus Friday's settle of $79.49/b.
"Anything less than 500,000 bpd would be shrugged off by the market. Therefore, we see a significant chance of a cut as large as 1 million bpd," said ANZ commodity strategist Daniel Hynes, commenting on the first in-person OPEC+ gathering for 2.5 years.
However, the more hawkish members are seen likely to push for cuts of up to 1.5 million bpd day, although potentially staggered over two or three months.
The other possibility is Saudi Aramco announcing a unilateral cut, something OPEC's largest producer did in early 2021 when it announced a voluntary 1 million bpd cut for February and March of that year, followed by staggered increases in Q2.
However, any action will need to take other supply factors into consideration, including an ending of SPR sales in Q4 and expected drop in Russian exports when the EU embargo kicks in and the US-proposed price cap.
Although OPEC+ has no formal price target, some analysts believe that key members of the group, including Middle East producers, will look to stabilize benchmark Brent at between $90 and $100 per barrel.
The meeting comes after a Reuters survey showed that output from the core OPEC members rose in September to its highest since 2020. The group pumped 29.81 bpd in September, the survey found, up 210,000 bpd from August and the highest since April 2020.
Meanwhile, the market absorbed Friday's news that Chinese refiners had received an additional 15 million mt of export quotas for refined products, with likelihood of such a move already priced in.
The figures include 13.25 million mt for gasoline, diesel and jet fuel and 1.75 million mt for marine fuel 0.5%.
Chinese refiners have been ramping up international sales recently, with exports of diesel in August hitting a 13-month high.
