11/30/2023, 5:32 AM (Source: TeleTrader)
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OPEC+ meeting on key oil production decision looms

The meeting of the Organization of Petroleum Exporting Countries and its allies, also known as OPEC+, is set to begin virtually on Thursday, with member states to decide on the future oil production volumes amid a tumultuous geopolitical stage, which further fueled concerns about the stability of the oil market. Crude prices experienced declines during the first six months of this year primarily driven by tight monetary policies, underwhelming economic recovery in China, and the brief banking sector crisis in the United States and Europe, which raised questions about the commodity's demand around the world.

However, global markets encountered additional supply-side shocks beyond those prompted by the conflict in Ukraine. Two of the oil cartel's largest producers, Russia and Saudi Arabia committed to voluntary crude output reductions earlier this year in an attempt to stabilize the global market, with both countries deciding to maintain reduced levels of production until the end of December. The International Energy Agency previously warned that additional output cuts will only push prices higher amid "strong inflationary pressures," with OPEC+ oil production projected to fall by 300,000 barrels per day next year.

The commodity prices came under additional pressure following the start of the war between Israel and Hamas on October 7, with markets thrown into concern that the conflict could spread throughout the region, which accounts for one-third of the world's seaborne oil trade. Market participants are closely watching the reactions of the Middle Eastern nations to the raging conflict which could define the outcome of the oil cartel's meeting on production quotas for 2024. The temporary humanitarian pause between the two parties offered some relief to oil prices just ahead of the group's meeting.

Baha Breaking News (BBN) / AB