Crude oil prices closed stronger on Monday despite predictions that rising supply will outweigh demand in the months ahead, while hopes of progress in ending a government shutdown in the United States raised investors’ risk appetite.
Brent crude futures increased by 26 cents or 0.4 per cent to trade at $63.89 a barrel and the US West Texas Intermediate (WTI) crude futures gained 23 cents or 0.4 per cent to finish at $59.98 a barrel.
The market keeps looking at expectations that crude oil supply will exceed demand in the months ahead due to higher production from the Organisation of the Petroleum Exporting Countries and allies (OPEC+) and record US output.
Earlier this month, OPEC+ agreed to increase output slightly by 137,000 barrels per day in December.
Market analysts noted that while the group also paused further hikes in the first quarter, that may not limit supplies enough to support prices.
Crude inventories are also on the rise in the US while the volume of oil stored aboard ships in Asian waters has doubled in recent weeks after tightening Western sanctions curtailed imports into China and India.
Oil from offshore Brazil, Guyana, Suriname, and Argentina’s Vaca Muerta shale play will be key sources of cost-competitive non-OPEC oil supply through 2030, Rystad Energy has predicted.
Rystad has predicted that global liquids demand will peak in the 2030s at around 107 million barrels per day, maintain a plateau above 100 million barrels per day through the 2040s before declining to around 75 million barrels per day by 2050. According to the Norwegian energy consultancy, non-OPEC+ supply will be key to balancing the global market, with cheap oil from South America helping to offset slower US shale growth.
Non-OPEC+ producers are expected to account for around 5.9 million barrels per day, or nearly 60 per cent, of new conventional oil currently under development through 2030 (total new capacity).
Doubts over the effectiveness of the latest US sanctions against Russia are also weighing on crude prices.
Russian oil producer Lukoil has declared force majeure at Iraq’s giant West Qurna-2 oilfield after Western sanctions on the Russian oil major hampered its operations. Lukoil’s operations faced mounting disruptions as a US deadline for companies to cut off business with the Russian company looms on November 21 and after an agreement to sell the operations to Swiss trader Gunvor collapsed.
Also, the US Senate moved forward on Sunday on a measure aimed at reopening the federal government and ending a shutdown. The move boosted investors’ risk appetite.