Light, sweet crude oil gained modestly Dec. 4 to settle above $53/bbl on the New York market while Brent crude oil also gained slightly to settle above $62/bbl as market participants considered Qatar’s announcement that it plans to leave the Organization of Petroleum Exporting Countries. Analysts said Qatar appears to be seeking to gain favor with US President Donald Trump’s administration. Having been in OPEC since 1961, Qatar is in a diplomatic standoff with Saudi Arabia, OPEC’s biggest producer.
Saudi Arabia and other countries imposed an economic and political boycott on Qatar last year, alleging it finances terrorism—which Qatar denies.
A Dec. 6 meeting is scheduled in Vienna where OPEC members and some other producers, including Russia, will discuss production levels. The cartel is trying to respond with production levels that would support oil prices, which had tumbled since October highs.
Meanwhile, Trump repeatedly has called for OPEC to keep prices from rising. Russia and Saudi Arabia recently said they agreed to extend OPEC efforts to rebalance markets although no production numbers were released.
Fereidun Fesharaki, chair of FGE, told Bloomberg that the cartel has no consensus yet going into the meeting. Fesharaki said three scenarios are possible: a 1 million-b/d cut, which would disappoint the oil market; no production cut, resulting in an oil price drop; or a cut of 1.3-1.4 million b/d, which would enable oil prices to move up slightly.
Fesharaki believes a cut of 1.4 million b/d is needed for 3 months to rebalance the market. “OPEC created a mess,” he said, adding that the cartel produced too much oil for a few months only to be surprised when Trump granted several countries waivers to Iranian oil sanctions, enabling larger volumes of Iranian oil to remain on world oil markets longer than previously expected.
Fesharaki said Qatar is one of the smaller OPEC producers, adding that the country produces as much condensate as it does crude oil. Condensate is not controlled by OPEC.
Separately, US government offices were closed Dec. 5 in observance of former President George H.W. Bush’s funeral.
The January light, sweet crude contract on the New York Mercantile Exchange gained 30¢ to $53.25/bbl. The February contract increased 32¢ to $53.46/bbl.
Natural gas futures for January gained about 12¢ to close at a rounded $4.46/MMbtu on Dec. 4.
Ultralow-sulfur diesel for January rose 1¢ to a rounded $1.91/gal. The NYMEX reformulated gasoline blendstock for January increased 1¢ to a rounded $1.44/gal.
Brent crude oil for February gained 39¢ to $62.08/bbl on London’s International Commodity Exchange. The March contract increased 40¢ to $62.22/bbl. The gas oil contract for December was $587.25/tonne, up $9.50.
OPEC’s basket of crudes for Dec. 4 averaged $61.09/bbl, up 52¢.
Contact Paula Dittrick at [email protected].