OIL FUTURES: Crude settles higher on OPEC+ expectations, weaker dollar

Oil futures settled higher Nov. 25 as the US dollar tested multi-year lows and the market increasingly priced in an extension of the OPEC+ production quota into next year.

NYMEX January WTI settled 80 cents higher at $45.71/b and ICE January Brent was up 75 cents at $48.61/b.

Oil prices saw a boost from a continued slide in the US dollar. The front-month ICE US dollar index fell below 92 in afternoon trading and was on pace to close at the lowest level since April 2018.

NYMEX December RBOB settled 2.93 cents higher at $1.2875/gal and December ULSD was up 2.71 cents at $1.3866/gal.

The US dollar has come under renewed pressure as the administration of President-elect Joe Biden starts to take form. A Biden presidency is expected to be more supportive of stimulus spending, fostering faster economic growth and a weaker dollar, according to S&P Global Platts Analytics. Both are bullish for oil prices.

Biden announced Nov. 23 that former US Federal Reserve chairwoman Janet Yellen would serve as Treasury Secretary. The appointment of Yellen, who was generally dovish on monetary policy during her tenure at the Fed, underscores the bearish outlook for the US dollar.

Adding to bullish sentiment, US Energy Information Administration data showed US crude supply contracted by 750,000 barrels during the week ended Nov. 20 to 488.72 million barrels. The counter-seasonal draw narrowed the surplus to the five-year average to 6.2%, the weakest since early April.

The market was also increasingly pricing in an extension of the current level of OPEC+ production cuts beyond their scheduled easing in December. OPEC and OPEC+ ministers are set to meet virtually Nov. 30-Dec 1, when they are expected to discuss extending production cuts as lockdowns in several key oil-consuming countries restrict demand.

Various key figures within the alliance have indicated the group may take action to undergird markets. Saudi Arabia's energy minister, Prince Abdulaziz, said during the ADIPEC virtual conference Nov. 9 that the current supply cut of 7.7 million b/d may even be deepened, but most market analysts are currently expecting the meeting to confirm a three- to six-month extension of current cuts.

"Given the current wave of lockdowns across the US and Europe, the consensus is that OPEC+ will roll over the current oil output deal next week," OANDA senior market analyst Edward Moya said in a note. "Now is not the time fight for market share, that will be sometime late next quarter."

While progress on COVID-19 vaccines has pushed energy prices steadily higher in recent sessions, the pandemic continues to weigh heavily on the near-term demand outlook. US gasoline demand edged down 130,000 b/d to 8.13 million b/d in the week ended Nov. 20, according to EIA data — the lowest since the week ended June 12 and nearly 12% behind year-ago levels.

The demand slowdown helped boost total US gasoline inventories 2.18 million barrels last week to 230.15 million barrels, a 10-week high, EIA said.