Singapore — Oil futures fell on Tuesday, reversing steep gains made in the past two sessions, as investors turned cautious ahead of a meeting of OPEC+ this Sunday when the producer group may discuss deepening supply cuts.
Brent crude futures fell 64 cents, or 0.8%, to $81.68 a barrel by 0630 GMT, while U.S. West Texas Intermediate crude futures were at $77.21 a barrel, down 62 cents, or 0.8%.
Both contracts climbed about 2% on Monday after three OPEC+ sources told Reuters that OPEC+, made up of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, was set to consider whether to make additional oil supply cuts when it meets on Nov. 26.
Those gains were trimmed on Tuesday.
“Investors took a wait-and-see attitude to confirm the actual OPEC+ decision,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
OPEC+ is likely to extend or even deepen oil supply cuts into next year, eight analysts have predicted.
RBC Capital analyst Helima Croft said: “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.”
Reopening the quota agreements reached in June could prove challenging and could lead to protracted negotiations, and hence the leadership may look for more voluntary adjustments from individual producers, she added in a note.
A Singapore-based trader said OPEC+ action above and beyond a rollover of current cuts has been partially priced into the market.
Oil prices have dropped about 16% since late September as crude output in the U.S., the world’s top producer, held at record highs, while the market was concerned about demand growth, especially from the world’s largest oil importer, China.
Traders were also watching for signs of demand destruction from a possible U.S. recession in 2024 and considering last week’s warning about possible deflation from Walmart (WMT.N), the largest U.S. retailer.
U.S. crude and gasoline stockpiles likely rose last week, while distillates inventories were seen dropping, a preliminary Reuters poll showed on Monday. Weekly stockpile reports from the American Petroleum Institute and the Energy Information Administration are due later on Tuesday and Wednesday, respectively.
*Florence Tan & Yuka Obayashi; editing: Stephen Coates & Sonali Paul – Reuters
