The Commodities Feed: Sentiment Lifts as OPEC Forecasts Tighter Oil Market

The Commodities Feed: Sentiment improves

The dovish comments from the Federal Reserve helped to improve sentiment yesterday, with gold prices recovering back to around US$2,030/Oz. Crude oil prices also gained on OPEC and EIA reports, although demand concerns continue to linger.

 

Energy – OPEC expects a tighter oil market

• The oil market recovered moderately yesterday as positive sentiment in the broader financial market pushed up oil prices as well. The monthly report from OPEC was constructive, with estimates of a huge deficit for the current quarter and next quarter. However, the market remains cautious as economic concerns continue to cloud demand prospects.

 

• In its latest Monthly Oil Market Report, OPEC estimated a tighter crude oil market for the fourth quarter of this year and 2024 as supply falls short of market demand if announced OPEC+ cuts are maintained. The OPEC revised down its non-OPEC crude oil production estimates by around 190Mbbls/d for the fourth quarter on lower output in the US and Asia. The requirement for OPEC crude is estimated at around 31.1MMbbls/d for the fourth quarter compared to around 27.9MMbbls/d of production in the quarter so far. For 2024, the organisation expects the requirement for OPEC crude to increase by around 0.8MMbbls/d to 29.9MMbbls/d.

 

• Meanwhile, OPEC also reported that crude oil production by member countries dropped marginally by 57Mbbls/d in November to 27.8MMbbls/d. Iraq and Angola reported major production losses of 77Mbbls/d and 37Mbbls/d respectively whilst Venezuela, Libya and Kuwait increased supplies at a moderate pace. OPEC production has largely been flat at around 27.8-27.9MMbbls/d for the last three months.
• The weekly report from the EIA has also been positive for the oil market yesterday, with crude oil inventory in the US falling by 4.3MMbbls over the last week against market expectations of around 1.5MMbbls of inventory withdrawal. Crude oil input to refineries increased by 0.2MMbbls/d to around 16MMbbs/d that have helped to increase demand for crude oil. Exports of crude oil remain constrained, largely due to congestion in the Panama Canal, with net imports increasing by 0.3MMbbls/d to 2.2MMbbls/d. Among refined products, gasoline inventory increased by 0.4MMbbls to 224MMbbls while distillate inventory also increased by 1.5MMbbls to 113.5MMbbls.