Oil Price Challenges Ahead of OPEC+ Meeting Amid Increased US Inventories

Oil markets are experiencing a period of stability,
with signs indicating the continued accumulation of oil inventories in the United States,
in anticipation of the upcoming “OPEC+” alliance meeting scheduled for the end of this week.

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View of Vishnu Varathan

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Brent crude prices, considered the global benchmark, maintained their stability above $82 per barrel, after ending Tuesday’s trading sessions with a slight increase.
Meanwhile, the price of West Texas Intermediate (WTI) approached $78. In this context,
the American Petroleum Institute announced that the country’s oil inventories increased by 9.05 million barrels last week, with storage levels rising in the “Cushing” center in Oklahoma, according to “Oil Price” website.
Additionally, “AlphaBBL” company reported an increase in the main oil storage facility.

Oil prices have faced negative impacts recently due to indicators suggesting an expansion of oil supplies from outside the Organization of the Petroleum Exporting Countries (OPEC), raising speculations about the possibility of extending or deepening production cuts by “OPEC+,” which includes non-OPEC member countries. Citigroup has suggested the possibility of taking further measures to reduce production by one-fifth.

View of Vishnu Varathan

Commenting on the situation, Vishnu Varathan, Head of Asian Economics and Strategy at Mizuho Bank in Singapore, explained that “it is likely that “OPEC+” will lean towards tightening policies in its meeting,” predicting an increase in US oil production in the fourth quarter and the easing of sanctions on Venezuela. He emphasized that an increase in supplies would not be acceptable to the alliance.

In another context, price differentials between oil contracts in different futures show market weakness, with the gap between prices in the nearest two contracts for Brent and WTI in a “contango” state. The immediate difference for Brent crude was 2 cents per barrel, compared to over one dollar per barrel in a “backwardation” state a month ago.”

Oil Price Challenges Ahead of OPEC+ Meeting Amid Increased US Inventories

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