New York — Crude futures shrugged off morning doldrums to settle within striking distance of intraday highs Monday after OPEC reiterated its commitment to agreeing on a new output deal at its upcoming meeting.
ICE February Brent settled $2.23 higher at $61.69/b and NYMEX January WTI was $2.02 higher at $52.95/b at market close.
OPEC ministers and delegates reassured the market that the group was committed to reaching a new output deal this week despite Qatar’s surprise withdrawal from the producer group on Monday.
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“This won’t complicate anything we are doing,” UAE energy minister and OPEC President Suhail al-Mazrouei told S&P Global Platts on Monday.
OPEC is scheduled to meet on December 6-7 and is widely expected to agree to cut output to support falling prices. S&P Global Platts Analytics forecasts a 1.2 million-1.4 million b/d reduction compared with October’s levels.
Crude prices jumped overnight on the heels of an announcement by Alberta Premier Rachel Notley that the province will tackle weak price differentials by mandating a 325,000 b/d production cut starting January 1.
At their intraday peak, Brent and WTI reached highs of $62.60/b and $53.37/b, respectively.
But the rally stalled early Monday after Qatari energy minister Saad Al-Kaabi announced the gas-rich sheikhdom will exit OPEC on January 1. Qatar will exit the group after 57 years of membership to concentrate on building its position as the world’s top LNG supplier (See story, 1359 GMT). Qatari crude production averaged 600,000 b/d in November, accounting for about 2% of total OPEC output. While the loss of Qatari output will not meaningfully impact nameplate OPEC production, the marketinterpreted Doha’s defection as a sign that not all the bloc’s members are on the same page ahead of this week’s meeting.
Qatar’s decision comes against a backdrop of political division between oil producers in the Persian Gulf and could intensify rivalries. Qatar is locked in a bitter diplomatic feud with OPEC kingpins Saudi Arabia and the UAE, which have enforced an economic boycott of the peninsula.
CME Group analysis of NYMEX WTI crude options trading data pegged the probability of OPEC announcing a small production cut at 58.4% late Monday afternoon, while the chances of a little or no change to output levels was down to 39.84%. The chances of a significant production cut rose to 1.76% Monday, according to the analysis, having been at or near 0% for most of last week.
Product futures also increased Monday. NYMEX January ULSD settled 5.81 cents higher at $1.8875/gal and NYMEX January RBOB rose 2.95 cents to $1.4314/gal at market close.
— Chris van Moessner, [email protected] Herman Wang, [email protected]
— Edited by Keiron Greenhalgh, [email protected]
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Source: S&P Global Platts
