The Oil Market Sold Off Sharply on Wednesday After OPEC+ Producers Delayed Their Scheduled Meeting

Recap:  The oil market sold off sharply on Wednesday after OPEC+ producers delayed their scheduled meeting from Sunday until November 30th, signaling disunity among the producer group. While the group has delayed meetings before, the long delay indicates the difficulties within the OPEC+ group to reach an agreement to cut output, raising questions about the future course of production cuts. The crude market traded sideways overnight, posting a high of $77.97 before it sold off more than 5.1% to a low of $73.79 by mid-morning. However, the market rebounded and erased most of its losses as it traded back towards the $77.00 level during the remainder of the session. This was despite the EIA’s weekly petroleum stock report showing a larger than expected build in crude stocks of 8.7 million barrels.  The January WTI contract settled down 67 cents at $77.10 ahead of Thursday’s Thanksgiving holiday. The Brent contract settled down 49 cents at $81.96. The product markets settled in negative territory, with the heating oil market settling down 3.58 cents at $2.8891 and the RB market settling down 14 points at $2.2324.

Technical Analysis:  The crude market on Friday’s shortened session will likely trade sideways with light volume trading following Thursday’s Thanksgiving Day holiday. The market is seen trading in a range as the market awaits for further developments ahead of the OPEC+ meeting on Thursday, November 30th. The oil market is seen finding resistance at its high of $77.97, $78.46-$78.48 followed by $78.69 and $79.65. More distant upside is seen at $80.37 and $80.79. Meanwhile, support is seen at $76.40, $75.68, $74.73, $73.79 followed by $72.91 and $72.37.

Fundamental News:  The EIA reported that U.S. crude inventories increased in the week ending November 17th by 8.7 million barrels due to higher imports. Net crude imports increased by 259,000 bpd on the week. Meanwhile, distillate stocks fell by 1.02 million barrels to 105.6 million barrels, the lowest level since May 2022. East Coast distillates stocks fell to their lowest level since October 2022.

OPEC said OPEC+ has delayed its ministerial meeting to set output policy to November 30th from a previously scheduled meeting on November 26th. An OPEC+ source said Saudi Arabia and Russia are in agreement to delay the meeting due to outstanding issues with some other producers. The source said the delay might be to allow more time for countries to discuss both compliance with existing output cuts and potential additional cuts.

Morgan Stanley said oil demand growth will likely slow in 2024 to about 1.2 million bpd as post-COVID tailwinds abate and economic growth remains muted. It stated that although U.S. production slows sharply, non-OPEC supply is still likely to increase by 1.4 million bpd next year, enough to meet all global demand growth. It also said “OPEC will likely continue to balance the market and keep oil inventories around current levels; Our Brent forecast of $85/barrel flat is unchanged.”

On Wednesday, Israel's government and Hamas agreed to a ceasefire in Gaza for at least four days, to allow in aid and release at least 50 hostages captured by militants in exchange for at least 150 Palestinians jailed in Israel.

Goldman Sachs says the possibility of a deeper group oil output cut is on the table when OPEC+ oil producers meet and it expects Saudi Arabia and Russia to announce an extension of their additional voluntary curbs through at least the first quarter of 2024.

Hedge fund manager, Pierre Andurand, said OPEC+ may need to announce deeper oil production cuts this weekend to offset strong supply growth from the U.S. and elsewhere. He said Saudi Arabia probably wants higher prices and will urge fellow OPEC+ members to join its recent output cuts.

Early Market Call - as of 8:55 AM EDT

WTI - January $74.91, down 63 cents

RBOB - December $ 2.1734, up 83 points