Oil prices hold steady amidst oversupply concerns despite OPEC+ cuts

Oil prices held steady amidst ongoing concerns about a surplus in crude supply, despite production cuts by the OPEC+ alliance and expectations of softer fuel demand growth in the coming year. Brent crude futures saw a marginal decrease of 6 cents, settling at $75.78 per barrel by 1427 GMT, while U.S. West Texas Intermediate crude futures experienced a 7-cent dip, reaching $71.16. Although both contracts recorded a more than 2% increase on Friday, they marked their seventh consecutive weekly decline?the longest such streak since 2018?due to persistent worries about oversupply. John Evans, an oil broker at PVM, stated on Monday that there is little doubt about the oil complex remaining vulnerable. Despite OPEC+ committing to cut 2.2 million barrels per day (bpd) of crude oil production in the first quarter, investors continue to be skeptical about compliance. Forecasts indicate that output growth in non-OPEC countries could lead to excess supply next year. RBC Capital Markets predicts stock draws of 700,000 bpd in the first half but only 140,000 bpd for the entire year. The analysts at RBC emphasised that prices will likely remain volatile and directionless until clear data points on compliance with voluntary output cuts emerge. With the cuts not taking effect until the next month, the oil market faces two months of volatility before clarity emerges from quantifiable compliance data, according to the analysts. The latest consumer price index data from China, the world's largest oil importer, indicates rising deflationary pressures, casting doubt on the country's economic recovery due to weak domestic demand. Investors are closely monitoring meetings at five central banks, including the US Federal Reserve, for guidance on interest rate policies. Additionally, US inflation data is being observed to assess potential impacts on the global economy and oil demand. Recent weakness in prices prompted demand from the United States, which plans to purchase up to 3 million barrels of crude for the Strategic Petroleum Reserve (SPR) in March 2024. Analysts note that the Biden Administration's efforts to refill the SPR are providing support to prices, along with technical chart indicators. Simultaneously, a draft of a potential climate deal at the COP28 summit on Monday outlined various options for countries to reduce greenhouse gas emissions. However, it omitted the phase-out of fossil fuels, a demand made by many nations. UN Secretary-General Antonio Guterres emphasised that the success of COP28 would hinge on whether it produced a deal to phase out coal, oil, and gas rapidly enough to avert disastrous climate change.