Oil prices end at highest in a week after OPEC+ delays output hike by another month

MW Oil prices end at highest in a week after OPEC+ delays output hike by another month

By Myra P. Saefong and William Watts

Natural-gas futures rally more than 4% on Gulf storm risk

Oil futures finished sharply higher Monday after members of OPEC+ - made up of the Organization of the Petroleum Exporting Countries and its allies - said they would wait yet another month before beginning to unwind 2.2 million barrels a day in production cuts.

Natural-gas prices, meanwhile, posted a gain of more than 4%, buoyed by an intensifying weather system, currently referred to as Tropical Depression 18, that may be heading to the Gulf of Mexico, putting oil-and-gas infrastructure at risk.

Price moves

-- West Texas Intermediate crude CL00 for December delivery CL.1 CLZ24 rose $1.98, or nearly 2.9%, to settle at $71.47 a barrel on the New York Mercantile Exchange.

-- January Brent crude BRN00 BRNF25, the global benchmark, added $1.98, or 2.7%, to $75.08 a barrel on ICE Futures Europe. Brent and WTI both settled at their highest prices since Oct. 25, according to Dow Jones Market Data.

-- December gasoline RBZ24 added 2.7% to $2.02 a gallon, while December heating oil HOZ24 tacked on 2.2% to $2.28 a gallon.

-- Natural gas for December delivery NGZ24 settled at $2.78 per million British thermal units, up 4.4%.

Market drivers

"OPEC+ may have hit the pause button - but the market rollercoaster is just getting started," Stephen Innes, managing partner at SPI Asset Management, told MarketWatch in emailed comments Monday.

"By postponing the production hike, they're effectively buying two crucial months - time for China's stimulus, particularly initiatives from the National People's Congress starting on Nov. 4, to seep into its energy markets," he said.

In a news release posted Sunday, OPEC said that Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman would extend voluntary cuts, totaling 2.2 million barrels per day (bpd) of production, until the end of 2024.

The announcement of a one-month extension to OPEC+'s voluntary output cuts "won't, on its own, make a huge difference to global oil supply," said Kieran Tompkins, climate and commodities economist at Capital Ecnoomics, in a note. "If it is just a one-month delay to when voluntary output cuts will be unwound, the oil market will be 165,000 bpd (0.2% global supply) more constrained in 2025."

The cuts had initially been scheduled to be phased out beginning in October, but were previously extended to the end of November. The continued delays come as oil futures have tumbled sharply since midyear.

"With continued uncertainty around 2025's demand outlook, the pause decision is consistent with the leadership's June pledge to remain prudent about production decisions and to avoid sudden shocks," Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note. Fears that OPEC was set to oversupply a fragile market have been weighing heavily on sentiment, she said.

Crude prices have seen spikes higher around rising Middle East tensions that have threatened to spill over into a broader war that could affect crude flows from the region. But those rallies have tended to prove relatively mild and short-lived, and have been followed by aggressive bouts of selling when tensions have eased.

"The fog of uncertainty looms large, with unpredictable factors like the U.S. election and the ongoing Eastern European conflict adding thick layers of risk to an already-tense landscape," said Innes.

U.S. election polls show a race that's too close to call between Vice President Kamala Harris, the Democratic nominee, and former President Donald Trump, the Republican nominee.

Check out: Here are the stakes for stocks, bonds, gold and other markets as investors await too-close-to-call election

Trump has vowed to put in place policies that would increase U.S. crude production, while Harris is seen continuing to emphasize clean energy. However, trades based on policy expectations don't always work out over the long run; traditional fossil-fuel energy companies significantly underperformed their green-energy counterparts during Trump's term in the White House and have significantly outperformed during President Joe Biden's term.

Read: Lower gasoline prices likely to be a 'gift to the next president,' says GasBuddy

Prices for natural gas also climbed sharply Monday, with Tropical Depression 18 expected to become a tropical storm late Monday and a hurricane by Wednesday, according to the U.S. National Hurricane Center.

Natural-gas prices had been weak due to warm weather, but have "flipped to the upside as the storm track looks more likely to shut in some Gulf natural-gas and oil production," Phil Flynn, senior market analyst at the Price Futures Group, told MarketWatch. "The key will be the intensity and the market will have to watch this very closely."

-Myra P. Saefong -William Watts

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November 04, 2024 15:26 ET (20:26 GMT)

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