Oil Prices May Surge Due to Potential Cuts, Says Expert

While the US markets slow during Thanksgiving, oil prices remain volatile. The postponement of an OPEC meeting from November 26 to 30 to discuss 2024's oil output has affected West Texas Intermediate (WTI) prices, a key oil benchmark.

The delay led to a drop in prices, with US crude falling to $76.01 a barrel, a decline of 2.4%.

Oil prices have decreased by nearly 19% since September due to excess supply. OPEC+ is expected to reduce production to stabilize prices, leading to an early market rally that was later reversed.

Energy expert Anas Alhajji predicts a possible unexpected cut announcement from Saudi Arabia. The speculation arises from difficulties within OPEC+ in setting production quotas for countries like Nigeria and Angola. The upcoming virtual meeting on November 30 is likely to be brief and is seen by Alhajji as a sign that agreements have already been made. This meeting also coincides with the COP28 climate summit.

Alhajji foresees potential OPEC+ production reductions, as well as extended voluntary cuts by Saudi Arabia into early 2024 due to typical demand dips in the first quarter. He further suggests that Saudi Arabia may announce additional voluntary reductions.

Alhajji explains that by tightening supply and creating a backwardation market (where current oil prices are higher than futures), Saudi Arabia aims to control the market. Currently, the market is in contango, with futures priced higher than present values, encouraging oil storage and increasing inventory. Additional Saudi cuts could reverse this trend.