The high discount on Western Canadian Select oil is temporary: Randy Ollenberger
Oil climbed to an intraday high with OPEC and its allies expected to consider deeper production cuts when they meet this weekend.
West Texas Intermediate rose as much as 2.1 per cent to an intraday high of US$77.84, reversing course after futures earlier dropped to the lowest since 2021. Protests over harsh anti-COVID measures erupted across the world’s largest crude importer over the weekend, spurring a broad selloff in commodities as the week opened.
The nearest portion of the Brent and WTI futures curves flipped into contango -- a bearish structure indicating oversupply -- with physical markets also under pressure. Speculators markedly reduced bullish bets, posting the sixth-largest reduction in net-long positions on record for Brent last week.
OPEC+ will meet Sunday to decide on its next output level, while European Union nations negotiate plans for a price cap on Russian crude. The market’s weak structure is likely to be a source of concern for OPEC as it heads into the meeting, with conditions seemingly ripe for another output cut, said Eurasia Group.
“Given overall market conditions, OPEC+ will seriously consider a new production cut at its upcoming meeting, particularly if crude prices fall much below their current level in the next week,” analysts at Eurasia Group say in report. “Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how much disruption is evident in markets because of the EU sanctions.”
JPMorgan Chase & Co. cut its outlook for next year, analysts including Natasha Kaneva wrote in a report. The bank reduced its Brent crude forecast by $8 to $90 as it expects Russian production to hit prewar levels by mid-2023.
- WTI for January delivery rose $1.45 to $77.73 a barrel at 12:43 p.m. in New York
- Brent for January settlement added 29 cents to $83.92 a barrel.
Over the weekend, the US moved to grant supermajor Chevron Corp. a license to resume oil production in Venezuela after sanctions halted all drilling activities almost three years ago. The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition. Yet Chevron’s CEO said it might take years to begin to refurbish those oil fields, meaning additional output won’t be immediate.