Crude oil prices rose on Monday, against a backdrop of broadly favorable sentiment toward risk assets, at the start of a week that will see the Organization of Petroleum Exporting Countries and its allies hold their regular monthly review of the world market.
New York-traded West Texas Intermediate crude settled up $1.35, or 2.6%, at $53.55 a barrel.
London-traded Brent, the global benchmark for crude, finished the session up $1.31, or 2.4%, at $56.35.
The U.S. market was set for a dip in consumption in the North East as a large snowstorm prepared to strike New York City and the surrounding region, an event likely to take most of the region’s cars off the road temporarily.
However, the broader market was well supported, thanks largely to the gradual tightening of supply under Saudi Arabia’s unilateral output cuts of 1 million barrels a day. Those cuts, announced after the OPEC+ group’s last monthly meeting, came into force as of Monday, but have already been instrumental in accelerating the decline of world crude stocks over the last month.
OPEC’s joint technical committee is due to meet on Tuesday, while the policy-making Joint Ministerial Monitoring Committee, which includes delegates from Russia, Kazakhstan and others, meets on Wednesday. Last month’s meeting had not kept to that schedule, due to differences of opinion over output levels, and had finally ended in a modest overall increase in quotas that was more than offset by the Saudi decision.
The week started with newswire reports assessing that the OPEC+ group had stuck to its quotas, in aggregate, almost perfectly, although non-OPEC members’ output ran slightly ahead of target.
Over the weekend, the market had had time to digest data from the U.S. Commodity Futures Trading Commission showing that hedge funds and other speculative investors had again trimmed their net long positions in crude marginally to the lowest in two months. In addition, the Baker Hughes tally of active oil rigs in the U.S. rose to 295, its highest since May – although that’s still not a level capable of generating any meaningful increase in U.S. output, analysts say.
News from the corporate sector also continued to reverberate through the market, as The Wall Street Journal reported that Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) had discussed merging last spring in the dark days following the Saudi-Russian price war. The news stoked long-term concerns about the outlook for oil demand, which had already been stirred on Friday when General Motors (NYSE:GM) announced it wanted to end production of gasoline-powered vehicles by 2035.
(* Crude prices updated to the close)