Crude Oil Futures Rebounded From 4-week Lows

Brent futures contract

At 10:10 am Singapore time (0210 GMT), the ICE January Brent futures contract was up 81 cents/b (1.01%) from the previous close at $81.35/b, while the NYMEX December light sweet crude contract was 89 cents/b (1.13%) higher at $79.70/b.

OPEC+ meeting

Sentiment in oil markets was recovering after a 2-day selloff that wiped off up to 6% from front-month futures prices. A keenly watched OPEC+ meeting on Nov. 4 concluded without event, with the producer group sticking to its planned 400,000 b/d per month output increase as expected.

While investor sentiment has been shaken in recent days by large builds in US oil inventories and the threat of a release from US Strategic Petroleum Reserves, analysts noted that any selloff won’t go far as oil demand continued to outstrip supply as economies reopen.

US production

“The selloff in WTI crude won’t last long as the oil market is still in deficit,” said OANDA senior market analyst Edward Moya. “Whatever response the US has will likely be temporary relief and nothing that brings US production back to the levels seen under the Trump administration.”

“The mid-$70s/b should prove to be a very attractive entry for energy traders,” he added.

Struggle to raise output

Analysts at ANZ added that some OPEC members have struggled to raise output to their required quota levels not out of choice but due to aging equipment and years of underinvestment.

“OPEC stuck to its scheduled increase in oil production despite a surge in energy demand. Underinvestment by some OPEC members is constraining supply, while US shale producers are hesitant to ramp up production,” said ANZ’s Daniel Hynes and Soni Kumari in a note.

Iran nuclear deal talks

The resumption of Iran nuclear deal talks, scheduled for Nov. 29, could provide some relief, if an elusive deal that lifts sanctions can be reached. Platts Analytics expects that Iranian crude supply could rise by some 1.4 million b/d with a deal.

As they have at every meeting, OPEC+ ministers said they would continue to convene monthly to monitor supply and demand fundamentals. The next meeting is scheduled for Dec. 2.

US oil rig count

The US oil rig count has continued to climb amid the upswing in prices. The number of rigs chasing primarily oil has moved 16 higher on the week to 528, energy analytics and software company Enverus said, marking the largest one-week increase since March and pushing the number of active oil rigs to the highest since April 2020.