By Erwin Seba
HOUSTON (Reuters) – Brent and U.S. crude futures climbed more than 2.5%, gaining $2 a barrel, on Monday as further supply cuts in OPEC+ production are expected to be announced following a meeting of member countries early next week.
Brent crude futures were up $2.19 to $82.80 a barrel by 12:15 p.m. CST (1815 GMT). U.S. West Texas Intermediate crude was up $2.13, or 2.81% at $78.02.
The front-month December WTI contract expires later on Monday. The more active January futures gained $2.39 to $78.34, up 3.02%.
Both contracts settled 4% higher on Friday after three OPEC+ sources told Reuters that the producer group, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, is set to consider whether to make additional supply cuts when it meets on Nov. 26.
“The OPEC commentary signalling further cuts came right on cue,” said John Kilduff, partner with Again Capital LLC. “I would expect any cut would be modest. The Saudis have cut so much production, I don’t know how much more they can do.”
Oil prices have dropped almost 20% since late September, while prompt inter-month spreads for Brent and WTI slipped into contango last week. In a contango market, prompt prices are lower than those in future months, signalling sufficient supply.
Traders were also watching for signs of demand destruction from a possible U.S. recession in 2024 and also considering a warning about possible deflation from leading retailer Walmart Inc
But most of all, traders were waiting for the OPEC+ meeting sent for Sunday.
Andrew Lipow, president of Lipow Oil Associates, said members will be focused on supply and demand and not using crude as a weapon against the United States, which is supporting Israel in its seven-week-old war against Hamas.
“Some of the countries are concerned about the war spreading to a regional conflict,” Lipow said. “They want to see their oil continue to flow.”
The number of oil and gas rigs operated by U.S. companies rose last week, the first gain in three weeks, energy services business Baker Hughes said on Friday. The oil and gas rig count serves as an early indicator of future output.
Meanwhile, U.S. oil refiners are on course to boost production by 559,000 barrels per day (bpd) this week as they come out of fall planned maintenance leaving just 264,000 bpd of capacity offline, research company IIR Energy said on Monday.
(Reporting by Erwin Seba in Houston; additional reporting by Paul Carsten, Florence Tan and Emily Chow, Editing by David Goodman, Ed Osmond, Bill Berkrot and Cynthia Osterman)