Market Analysis

Oil prices dipped slightly on Thursday following an unexpected increase in U.S. gasoline inventories, as attention turned to the upcoming OPEC+ meeting, where oil output policy will be reviewed.

By 0401 GMT, Brent crude futures dropped 14 cents (0.2%) to $72.69 per barrel, while U.S. West Texas Intermediate (WTI) crude declined by the same margin to $68.58 per barrel. Market activity is anticipated to be subdued due to the U.S. Thanksgiving holiday starting Thursday.

The near-term bearish trend in oil is likely to persist, driven by diminishing supply disruption risks in the Middle East and a larger-than-expected rise in U.S. gasoline inventories, according to IG market strategist Yeap Jun Rong.

Data from the U.S. Energy Information Administration (EIA) showed that U.S. gasoline stocks increased by 3.3 million barrels in the week ending Nov. 22, contradicting expectations of a slight decline ahead of record holiday travel. [EIA/S]

Oil prices have been under pressure throughout the year due to sluggish fuel demand growth in major consumers like the U.S. and China. However, supply cuts from OPEC+—a coalition of the Organization of the Petroleum Exporting Countries and allies such as Russia—have helped prevent steeper losses.

OPEC+ is set to meet on Sunday, with discussions reportedly underway to delay a planned output increase initially scheduled for January. According to Reuters, a delay is widely anticipated and has already been priced into the market, noted Suvro Sarkar, head of the energy sector team at DBS Bank. He added that the length of the delay—whether one month, three months, or longer—could influence market sentiment. Conversely, oil prices could decline if no postponement is announced.

The coalition, responsible for about half of global oil production, had previously committed to incrementally easing production cuts through 2024 and 2025.

This week, both Brent and WTI have fallen more than 3%, partly due to Israel's ceasefire agreement with Lebanon’s Hezbollah, which began Wednesday. The truce has alleviated fears of potential disruptions to oil supplies from the Middle East, a key production hub.

Still, ANZ Bank analysts warned that uncertainty lingers over the duration of the ceasefire, adding to the geopolitical complexities affecting the oil market.

Despite the bearish sentiment, heads of commodities research at Goldman Sachs and Morgan Stanley have argued that oil prices are undervalued given a market deficit. They also highlighted potential risks to Iranian supply from U.S. sanctions.

Paraphrasing text from "Reuters" all rights reserved by the original author.