OPEC+ May Continue to Cut Production, International Oil Prices Rose and Fell on the 28th

As the market was worried about the prospect of oil demand and expected OPEC+to reduce production again, the international crude oil futures prices fell significantly in the overnight market. On the 28th, they recovered in the morning, and adjusted in a narrow range in the afternoon. At the end of the day, the international oil prices rose and fell unevenly.

By the end of the day, the price of light crude oil futures for delivery in January 2023 on the New York Mercantile Exchange had risen by $0.96, or 1.26%, to close at $77.24 a barrel. The price of London Brent crude oil futures for delivery in January 2023 fell by 0.44 US dollars to close at 83.19 US dollars per barrel, a decrease of 0.53%.

Matt Smith, an oil analyst led by KPLER Americas, a market research institute, said that there was a rumor that OPEC+had proposed to reduce production at the ministerial meeting on December 4, which helped reverse the decline of oil prices in the overnight market.

Phil Flynn, senior market analyst of Price Futures Group, said that he felt that the market had sold too much earlier. Oil inventories are still close to historical lows, which may increase the probability of OPEC's production reduction.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, believes that the probability of OPEC+introducing more production reduction measures has increased. The price structure of oil prices in New York and Brent crude oil futures has changed from premium to discount, which makes OPEC+further confirm that the current demand is weak and needs to take action.

Babin said that the probability of OPEC+further reducing its output by 500000 barrels per day at the December 4 meeting may reach 60%, while the probability of maintaining the production quota unchanged is 40%.

Babin predicted that, based on the end of the release of strategic crude oil reserves in the United States and the stabilization of China's demand, the oil price may recover some recent declines. Next year, the oil price in New York is expected to fluctuate in the range of 85-90 dollars per barrel, while the Brent oil price is expected to fluctuate in the range of 95-100 dollars per barrel.

UBS Group said on the 28th that worries about the weakening of China's energy demand led to a 2.9% drop in Brent oil price, which has dropped by more than 17% since the peak in November. The downward pressure caused by the weakening of global economic growth should offset the upward pressure on oil prices caused by the reduction of global supply.

In spite of this, UBS Group still maintains a positive and optimistic expectation on oil price. It is expected that Brent's oil price will be around $110 per barrel next year. OPEC+will hold a ministerial meeting on December 4 and consider measures to deal with the decline in oil prices. The EU has imposed a ban on Russia's offshore crude oil exports since December 5, which should support oil prices. At the same time, the United States and OECD countries are ending the release of strategic crude oil reserves.

Greg Sharenow, bulk commodity portfolio manager of PIMCO, said that more capital discipline shown by oil and gas companies limited the prospects of oil supply in the future, which is a key reason for bullish oil prices.

Cherno said that oil prices are also approaching the level at which the United States is considering buying to supplement its strategic crude oil reserves, which are now quite limited.