Oil prices extended their surge on Monday, driven by the possibility of further supply reductions from the Organization of Petroleum Exporting Countries (OPEC) to raise prices, which were in four straight weeks of decline, as concerns over Middle East supply disruptions due to the Israel-Hamas war eased.
January contract Brent crude oil futures gained 0.98% to $81.40 per barrel, while the US West Texas Intermediate (WTI) crude futures for January delivery added 0.99% to $76.79 per barrel.
The front-month December contracts are set to expire later in the day. US and Israeli officials stated that they are near reaching an agreement to free some of the hostages held in Gaza amid the intense battle.
More Supply Cuts from OPEC+ Might Boost Oil Prices
The two benchmarks increased 4% on Friday after OPEC and allies, including Russia (OPEC+), might explore cutting more of the oil supply at its meeting on November 26.
Crude prices have fallen nearly 20% since late September, while prompt inter-month spreads for the Brent and WTI reached contango in the prior week, pointing to adequate supply.
OPEC’s leader, Saudi Arabia, is trying to keep a balance in maintaining higher oil prices by curbing supply despite the possibility that it could bring the total market share further down.
Oil markets will see whether the group’s de-facto leader decides to continue the supply cuts through next year or slowly ease them or wait for their expiration at the end of 2023.
Analyst Tony Sycamore said prices of the US oil benchmark may hit $80 per barrel on the prospect of OPEC+ carrying out additional reductions at its meeting later this month.
However, a slide below $72 may call for a refill in the US Strategic Petroleum Reserve (SPR) from President Joe Biden’s administration.
According to Sycamore, all of which signaled that prices might recover in the first half of this week.
Investors are also keeping an eye on the trading of Russian oil after Washington last week sanctioned three oil tankers that transport Sokol crude from Russia’s Far East to Indian Oil Corp. Ltd.
Possibly increasing global supplies of the motor fuel was Moscow’s move to remove gasoline export restrictions following Russia lifting most prohibitions on diesel exports in October.
A US energy services firm also reported a week earlier that energy companies in the country had added oil and gas rigs for the first time in three weeks. Oil and gas rig counts offer early clues on future production.
