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Oil prices settle slightly higher

Brent crude

Brent crude futures settled up 19 cents, or 0.3 per cent, to $76.03 a barrel while U.S. WTI crude futures settled up 9 cents, or 0.1 per cent, at $71.32

Oil prices settled slightly higher on Monday as OPEC+ production cuts failed to fully offset concerns around crude oversupply and softer fuel demand growth next year.

Brent crude futures settled up 19 cents, or 0.3 per cent, to $76.03 a barrel while U.S. West Texas Intermediate (WTI) crude futures settled up 9 cents, or 0.1 per cent, at $71.32.

Both contracts climbed more than 2 per cent on Friday but were lower for a seventh consecutive week, their longest streak of weekly declines since 2018, on lingering oversupply concerns.

There is little doubt that the oil complex remains in a state of vulnerability, PVM’s John Evans said in a note on Monday.

Despite a pledge by the OPEC+ group, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, to cut 2.2 million barrels per day (bpd) of crude oil production in the first quarter of next year, investors remain sceptical about compliance.

Members participating in the output reduction are not only seeing lower revenue from smaller volumes but also from the price slump that developed subsequent to the last OPEC+ decision, according to Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.

Output growth in non-OPEC countries is expected to result in excess supply in 2024.

RBC Capital Markets expects stock draws of 700,000 barrels per day in the first half, but only 140,000 barrels per day for the full year.

Prices will remain volatile and directionless until the market sees clear data points regarding the voluntary output cuts, RBC analysts said in a note.

With cuts not implemented until next month, oil faces a volatile two months before clarity from any quantifiable compliance data, the analysts added.

The latest CPI data from China, the world’s largest oil importer, showed rising deflationary pressures as weak domestic demand cast doubt over the country’s economic recovery.

Chinese officials on Friday pledged to spur domestic demand and consolidate and enhance the economic recovery in 2024.

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