Brent fell $1.15/bbl last week to average $62.50/bbl, exactly in line with our forecast, with the OPEC+ meeting providing significant support at the end of the week. Brent will likely drift slightly lower this week from Friday’s levels, averaging at least $63.50/bbl.
In advance of the OPEC+ meeting, traders effectively erased the bullish positions put into place, likely as a matter of short-term profit taking. However, while the new supply agreement is supportive for first-quarter prices, managed money net positioning is still unlikely to rally significantly through the end of the year as demand concerns persist.
Now that the OPEC meeting has concluded, attention will return to the outlook for demand next year. The December 15 deadline for another round of US tariffs on Chinese imports is fast approaching with no apparent progress made on postponing them as part of the current uneasy truce. Additionally, the most recent customs data shows that Chinese exports fell for the fourth month in a row, adding to concerns about the global economy. For the week ahead, any headlines about US-China trade talks could have an outsized impact on prices.
US crude runs, especially in PADD 3, will continue to grow in the weeks ahead, likely leading to product stock builds. Runs traditionally increase at the end of the year due to tax regulations that incentivize minimizing crude held in storage. This is also likely to lead to product stock builds, which could play into already bearish sentiment about demand.
Geopolitical Unrest – Neutral
Global Economy – Negative
Oil Supply – Positive
Oil Demand – Neutral
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