Oil prices were higher on Thursday as investors eagerly awaited the outcome of an anticipated OPEC+ meeting that could lead to deeper supply cuts in 2024.
Brent crude futures for January climbed 90 cents, or 1.08%, to $84 a barrel, on subdued volumes given the contract is meant to expire today. Meanwhile, U.S. West Texas Intermediate crude futures crept up 87 cents, 1.12%, at $78.73 a barrel.
The OPEC+ group, which includes the Organization of Petroleum Exporting Countries and allies including Russia, is expected to hold virtual meetings on Thursday to discuss additional production cuts that could range between 1 million to 2 million barrels per day (bpd) in early 2024.
The meeting, being held on the same day as global leaders gather in Dubai for the U.N. climate conference, was originally scheduled for last week but was deferred due to disagreements over output quotas for African producers.
Implementing additional cuts will send prices higher in the immediate future but long-term, their impact will be “dubious”, said Tamas Varga of oil broker PVM.
Compliance will be an issue, and the global oil balance is probably much less tight than OPEC estimates, he said, citing the latest commercial inventory data out of the United States and the stubbornly high interest rates in many major economies that are likely to dampen oil demand.
The U.S. Energy Information Administration on Wednesday reported a surprise build in U.S. crude oil stocks last week, with inventories up by 1.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 933,000-barrel drop.
But oil prices on Wednesday shrugged off the data with all eyes on the OPEC+ meeting, analysts said.
Adding to the pessimism on the demand side are China’s persisting economic troubles, embodied in the latest factory data published on Thursday, which showed contraction for second straight month in November.