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Oil prices were climbing upwards midday Monday, with Brent crude gaining over 1.6% after the market digested an OPEC report suggesting demand in the U.S. and China is not lowering to the point of concern.
The markets were also responding to unclear indications from the U.S. Federal Reserve about a potential end to rate hikes, with various investment banks speculating on rate reductions in the next 12 months.
At 12:45 p.m. EST on Monday, Brent crude was trading at $82.74, up 1.61% for a $1.31 gain on the day. West Texas Intermediate (WTI) was trading at $78.46, up 1.67%, for a $1.29 per barrel gain on the day. OPEC’s Monthly Oil Market Report (MOMR) stated that the cartel sees fundamentals as strong, expecting an increase in Chinese crude imports to a new yearly record this year and dismissing negative market sentiment as overblown.
“Recent data confirms robust major global growth trends and healthy oil market fundamentals,” OPEC said in comments that followed the Saudi energy minister’s statement late last week that speculators were responsible for the recent plunge in oil prices to their lowest levels since July.
Additionally, OPEC’s MOMR showed that the cartel’s crude oil production rose in October by 80,000 barrels per day (bpd) compared to September. However, output from countries bound by the OPEC+ pact was still below agreed-upon levels.
OPEC’s 13 members averaged production of 27.9 million bpd in October, with the 80,000 bpd increase as result of output from Angola, Iran and Nigeria, while output fell in Libya, Saudi Arabia and Kuwait.
Also chiming in on oil prices are sentiments about the Fed’s next move. Goldman Sachs investment bank has told clients it sees energy benefitting from hedging against war-risk premiums in the coming 12 months, and expects the Fed to start reducing interest rates in Q4 2024.
Morgan Stanley expects the Fed to start reducing interest by June next year and to continue until they are lowered to 2.375% by the end of 2025.
By Tom Kool for Oilprice.com
Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations