Expectations OPEC+ Will Increase its Output Again in November

Recap: The oil market on Monday sold off sharply on expectations that OPEC+ will increase its output again in November and the resumption of oil exports by Iraq’s Kurdistan region via Turkey. Sources stated that OPEC+ will likely approve another increase to crude oil production of 137,000 bpd at its meeting on Sunday. Meanwhile, crude oil flowed through a pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey for the first time in 2-½ years on Saturday. The crude market opened lower and retraced some of its previous losses as it posted a high of $65.40. However, the market sold off sharply and retraced more than 62% of its move from a low of $61.06 to a high of $66.42 as it posted a low of $62.98 ahead of the close. The November WTI contract settled down $2.27 at $63.45 and the November Brent contract settled down $2.16 at $67.97. The product markets ended the session lower, with the heating oil market settling down 7.23 cents at $2.3566 and the RB market settling down 4.25 cents at $1.9951.

Technical Analysis: The crude market is seen retracing some of its sharp losses and trading mostly sideways as it awaits for the release of the weekly petroleum stocks reports late Tuesday and Wednesday morning. The market will weigh the expectation of increased crude output against the continuing geopolitical tensions and will look to the developments on whether Hamas accepts a 20 point peace proposal that U.S. President Donald Trump agreed to with Israeli Prime Minister Benjamin Netanyahu regarding the future of Gaza. The oil market is seen finding support at its low of $62.98 followed by $61.85, $61.61, $61.42 and $61.06. Meanwhile, resistance is seen at $64.29, $64.70, $65.11, $65.40 followed by $66.42.

Fundamental News: U.S. President Donald Trump said that it is time for Palestinian militant group Hamas to accept a 20-point peace proposal that he agreed to with Israeli Prime Minister Benjamin Netanyahu regarding the future of Gaza. Meanwhile, Israeli Prime Minister Benjamin Netanyahu said he supported U.S. President Donald Trump’s peace proposal to end the war in Gaza. Standing next to President Trump, Israel’s Prime Minister said “I support your plan to end the war in Gaza, which achieves our war aims. It will bring back to Israel all our hostages, dismantle Hamas’ military capabilities, end its political rule, and ensure that Gaza never again poses a threat to Israel.” Separately, Hamas official Mahmoud Mardawi reiterated that the group has not yet received U.S. President Donald Trump’s written Gaza peace plan.

In a joint statement, Germany, France and Britain said they will “continue to pursue diplomatic channels and negotiations” despite the reimposition of U.N. sanctions on Iran. The statement said “The reinstatement of U.N. sanctions does not mean the end of diplomacy.”

Former Russian President Dmitry Medvedev said that Europe could not afford a war against Russia but that if its leaders made the mistake of triggering one then it could escalate into a conflict with weapons of mass destruction.

Ukrainian President, Volodymyr Zelenskiy, said Ukraine would like to build a joint aerial defense shield to protect against threats from Russia together with its European partners. NATO leaders have said that Russia has been testing the alliance’s readiness and resolve with airspace incursions in Poland and the Baltic states, and Kyiv says its experience in dealing with aerial threats would be valuable.

Three sources familiar with the talks said OPEC+ will likely approve another oil production increase of at least 137,000 bpd at its meeting next Sunday, as increasing oil prices encourage the group to try to further regain market share. OPEC+ has reversed its strategy of output cuts from April and has already raised quotas by more than 2.5 million bpd. Eight OPEC+ countries will hold an online meeting on October 5^th to decide on November output.

Crude oil flows from Iraq’s Kurdistan region to Turkey’s Ceyhan port are running at 150,000-160,000 bpd after their resumption on September 27^th.

Early Market Call – as of 8:30 AM EDT

WTI – Nov $62.31, down 87 cents

RBOB – Oct $1.9651, down 2.17 cents

HO – Oct $2.3365, down 62 points

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