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OIL FUTURES: Crude prices higher following OPEC+ meeting

  • Author
  • Rohan Gupta
  • Editor
  • Kshitiz Goliya
  • Commodity
  • Oil

Singapore — [0325 GMT] Crude oil future prices ticked higher during the mid-morning trade in Asia Sept. 18, as the markets continued to price in a commitment from the OPEC to ensure that the members adhere to the mandated production cuts.

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At 11:25 am Singapore time (0325 GMT), ICE Brent November crude futures were trading at $43.51/b, up 21 cents/b (0.48%) from the Sept. 17 settle, while the NYMEX October light sweet crude contract was at $41.16/b, up 19 cents/b (0.46%).

The uptick in the crude oil futures market comes after the Brent and WTI markers surged $1.04/b and $0.73/b, respectively, on Sept. 17 from the Sept. 16 settle following the OPEC+ meeting.

During the meeting, Saudi Arabia's energy minister Prince Abdulaziz bin Salman cracked down on the OPEC+ compliance laggards and secured commitments from them to compensate for their overproduction.

According to a technical report by the Joint Ministerial Monitoring Committee, countries that exceeded their quotas from May-August have a cumulative 2.375 million b/d of compensation cuts due, which are required to be completed by the end of the year –- an extension of the previous end-September deadline.

The UAE, which has thus far struggled to meet the production quotas, has already signaled that it will ensure compliance through ADNOC, which announced a 25% cut in November term volumes.

Referencing the upward trajectory of the crude oil futures market, Stephen Innes, Chief Global Markets Strategist at AxiCorp said in Sept. 18 note, "[Prior to the OPEC+ meeting], traders had already been nudging prices higher expecting a resolute messaging around quota compliance and compliance catch up where necessary so that global inventories continue to fall. [However during the meeting] OPEC+ over-delivered on both fronts as Prince Abdulaziz pulled no punches but instead came out swinging."

Innes, however, warned that while crude oil has recovered from its recent lows, demand fundamentals remain weak and the short-term trajectory of the market is sensitive to the pace of global economic recovery.

"The bearish builds in [oil] products unequivocally suggest weak demand, pointing to the market's Achilles heel, and could ultimately prove short-term price capper," he said in the note.