Oversupply of oil in the market is “exaggerated”, and demand continues to remain strong, as Opec+ prepares for another production increase next month, analysts have said.
The market is not “seeing the glut and it’s not evident yet in the physical market … it’s exaggerated”, Vandana Hari, chief executive of Singapore-based Vanda Insights, told The National.
She said demand for crude remains strong as a result of a combination of factors including limited diesel exports from Russia amid Ukraine attacks on its refineries and China stockpiling crude.
Winter season boosts on demand for heating oil are also expected.
“If China continues to buy for stockpiling, and I think they will … I see it as demand growth and a bullish signal,” Mr Hari said, adding that the coming winter season is expected to boost demand for crude in the Northern Hemisphere as demand for heating oil is projected to rise.
The comments come as Opec+, the supergroup of oil producers led by Saudi Arabia and Russia, prepares to boost production for November at their meeting on Sunday, after increasing output for seven consecutive months since April this year.
This week, Goldman Sachs predicted Opec+ to raise oil production by 140,000 barrels per day for November amid lower crude stocks in the US, higher demand in Asia and downside risks to Russia’s crude production as Ukraine attacks Russia’s refineries.
Last month, Opec+, citing steady global economic outlook and current healthy market fundamentals, approved adding about 137,000 bpd to the market for October as it began to unwind 1.65 million bpd of voluntary cuts announced in April 2023.
This came after the group eliminated about 2.2 million barrels of voluntary cuts announced in November 2023 the month before, with monthly cuts starting in April.
“I think the wise thing for Opec+ to do would be to bring this oil back in a phased manner, not to give the market another shock or try the market with another 500,000 [bpd],” Ms Hari said. She added that Opec+ is not aiming to prop prices up to a certain level and is now “willing to live with softer prices in the $60s [a barrel],” as they focus on diversifying their economies away from hydrocarbons.
US President Donald Trump’s pressure on countries to stop buying Russian crude in an effort to curtail Moscow’s revenue and spending on the Ukraine war is also impacting oil prices, but “has become increasingly a short-term phenomenon”, Ms Hari said.
“So, every time there is news of like, Trump issuing an ultimatum, or he giving [Russian President Vladimir] Putin a deadline, you see crude going up by $3 … it also comes off equally quickly,” she added.
Oil prices were trading higher on Thursday morning following losses in the previous three sessions, with potential tighter sanctions on Russian crude lending some support to crude even as oversupply concerns persist in the market.
Brent, the benchmark for two thirds of the world's oil, was up 0.24 per cent at $65.54 a barrel at 10.20am UAE time, while West Texas Intermediate – the gauge that tracks US crude – was trading 0.26 per cent higher at $61.94 a barrel.
Last week, oil prices posted their biggest weekly gains since June as Mr Trump increased pressure on buyers of Russian oil and Ukraine carried out new attacks on Moscow's energy infrastructure. Brent surged 6.19 per cent and WTI leapt 5.32 per cent from previous week’s close.
Oil prices edged higher on Thursday “after a sharp three-day slide of nearly 7 per cent, as markets awaited the weekend Opec+ meeting, where producers are expected to agree on another output hike for November despite concerns over a looming glut”, MUFG bank research analyst Soojin Kim said in a note on Thursday.
“The G7 is preparing tougher sanctions on Russia, targeting energy, finance, and defence sectors, while also weighing restrictions on countries and entities helping Russia bypass existing curbs,” Ms Kim added.
Meanwhile, Ms Hari expects oil to trade around “mid to high 60s” on an average this year as higher demand continued to support markets.
THE BIO
Family: I have three siblings, one older brother (age 25) and two younger sisters, 20 and 13
Favourite book: Asking for my favourite book has to be one of the hardest questions. However a current favourite would be Sidewalk by Mitchell Duneier
Favourite place to travel to: Any walkable city. I also love nature and wildlife
What do you love eating or cooking: I’m constantly in the kitchen. Ever since I changed the way I eat I enjoy choosing and creating what goes into my body. However, nothing can top home cooked food from my parents.
Favorite place to go in the UAE: A quiet beach.
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Chatham House Rule
A mark of Chatham House’s influence 100 years on since its founding, was Moscow’s formal declaration last month that it was an “undesirable
organisation”.
The depth of knowledge and academics that it drew on
following the Ukraine invasion had broadcast Mr Putin’s chicanery.
The institute is more used to accommodating world leaders,
with Nelson Mandela, Margaret Thatcher among those helping it provide
authoritative commentary on world events.
Chatham House was formally founded as the Royal Institute of
International Affairs following the peace conferences of World War One. Its
founder, Lionel Curtis, wanted a more scientific examination of international affairs
with a transparent exchange of information and ideas.
That arena of debate and analysis was enhanced by the “Chatham
House Rule” states that the contents of any meeting can be discussed outside Chatham
House but no mention can be made identifying individuals who commented.
This has enabled some candid exchanges on difficult subjects
allowing a greater degree of free speech from high-ranking figures.
These meetings are highly valued, so much so that
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Know your cyber adversaries
Cryptojacking: Compromises a device or network to mine cryptocurrencies without an organisation's knowledge.
Distributed denial-of-service: Floods systems, servers or networks with information, effectively blocking them.
Man-in-the-middle attack: Intercepts two-way communication to obtain information, spy on participants or alter the outcome.
Malware: Installs itself in a network when a user clicks on a compromised link or email attachment.
Phishing: Aims to secure personal information, such as passwords and credit card numbers.
Ransomware: Encrypts user data, denying access and demands a payment to decrypt it.
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Trojans: Create a backdoor into systems, which becomes a point of entry for an attack.
Viruses: Infect applications in a system and replicate themselves as they go, just like their biological counterparts.
Worms: Send copies of themselves to other users or contacts. They don't attack the system, but they overload it.
Zero-day exploit: Exploits a vulnerability in software before a fix is found.
MATCH INFO
AC Milan v Inter, Sunday, 6pm (UAE), match live on BeIN Sports
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