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Global oil prices stabilise amid delayed OPEC+ meeting and market speculation

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2023-11-23

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Global oil prices steadied in early Asian trading on Thursday after slumping earlier in the session due to the surprise news that an OPEC+ meeting had been postponed by four days to the following week.

The meeting, originally scheduled for this Sunday, was widely expected to result in an extension of Saudi Arabia and Russia's production cut of 1.3 million barrels a day into 2024, along with potential additional cuts to address the situation in Gaza. However, the OPEC secretariat abruptly announced the delay until November 30, without providing any explanation. This move sparked speculation, particularly regarding Saudi Arabia's possible dissatisfaction with bearing the burden of cuts while smaller members increased their output.

Intraday trading saw oil prices drop by over $3 per barrel as traders speculated about the reasons behind the delay and its implications. The news came just before the long US trading weekend for Thanksgiving, with fewer people expected at their desks on Friday, especially in America.

However, by early Asian trading at around 7:30 AM Sydney time, prices had partially recovered. Brent was trading around $81.80, down less than 1% from its session low of $78.41, and US West Texas Intermediate was down 1% at $76.90 after reaching a low of $73.79 earlier in the day.

The rescheduled OPEC+ meeting date coincides with the first day of the Conference of the Parties climate summit (COP28) in Dubai, a significant event for the host, the United Arab Emirates, as well as other Arab energy providers increasingly focused on the transition to renewables.

Earlier in the session, Bloomberg News reported that the Sunday meeting might be delayed due to Saudi Arabia's dissatisfaction with the oil production levels of certain countries. A senior OPEC+ delegate, requesting anonymity due to the sensitivity of the matter, confirmed Saudi concerns about compliance levels among alliance member countries with their output commitments.

Saudi Arabia itself is implementing a voluntary production reduction of 1 million barrels per day until year-end, in addition to contributing to a separate set of voluntary output cuts totaling 1.66 million barrels per day by several OPEC+ members, extending until the end of the following year.

The upcoming meeting faces a challenging market environment characterised by low oil prices, a slower-than-expected Chinese demand recovery, and the ongoing conflict in Gaza and Israel.

The slide in oil prices had minimal impact on Wall Street, which closed higher at the end of the trading session. The yield on the US 10-year Treasury bond inched up from just under 4% to about 4.1%, and the US dollar strengthened slightly, while the Australian dollar declined by a quarter of a percent to 65.40 US cents.

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