Oil Set for Monthly Gain Before OPEC+ Begins Cutting Output

(Bloomberg)

Oil fell as weak economic data from China fanned concerns about energy demand, but it was still set for the first monthly advance since May on OPEC+’s planned supply cuts.West Texas Intermediate futures dipped below $87 a barrel on Monday after Chinese government figures showed factory and services activity contracted in October. The nation’s Covid Zero policy and an ongoing slump in the property market have weighed heavily on the nation’s economy this year.

Crude is still up by more than 9% this month after a decision by the OPEC+ alliance to make sizable cuts to output. The curbs take effect from November and are the start of an uncertain period for oil supply heading into winter, with the European Union set to implement sanctions on Russian flows in December.

WTI poised to gain as OPEC+ cuts crude output

“Oil markets are very likely to focus on the situation in China which will continue to add bearish headwinds for flat price,” said Keshav Lohiya, founder of consultant Oilytics.

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Oil has shed a about a quarter of its value since June as concerns over a global economic slowdown and tight monetary policy threatened to curtail demand. Investors will be watching interest-rate decisions from central banks including the Federal Reserve this week. The dollar has retreated from a record high even as the Fed kept hiking rates to tame inflation, aiding crude as it makes commodities priced in the currency cheaper for most buyers.

Prices:

WTI for December delivery fell 1.5% to $86.61 a barrel at 10:06 a.m. in London.
Brent for December settlement, which expires on Monday, lost 1.3% to $94.52 a barrel.
The more active January contract was 1.3% lower at $92.56.

Monday is the first day of the Adipec oil and gas conference in Abu Dhabi. Eni SpA Chief Executive Officer Claudio Descalzi warned that Europe will have to rely on the US to make up for the loss of Russian oil supplies from next year. At the same time, President Joe Biden’s energy envoy said current US investment in new energy supply is not adequate.

Iranian Oil Minister Javad Owji will travel to Russia on Monday to discuss a $40 billion agreement with Gazprom PJSC to develop oil and gas fields in Iran, Tasnim news agency reported. Some 50 Iranian officials are already in Moscow for meetings, according to Tasnim.