OPEC argues against “overblown negative sentiment” in global oil market

(Bloomberg) – OPEC argued that “overblown negative sentiment” is dominating global oil markets as the group and its allies prepare to meet.

“Recent data confirms robust major global growth trends and healthy oil market fundamentals,” the group’s secretariat said in its latest monthly report. The outlook is positive “despite exaggerated negative sentiments.”

Even as OPEC insists that oil demand is strong, group leader Saudi Arabia is keeping its crude production at the lowest level in years. In concert with market ally Russia, the kingdom pledged to maintain the cutback next month, and analysts expect the reductions to continue into 2024.

The analysis in Monday’s OPEC report echoes last week’s comments from Saudi Energy Minister Prince Abdulaziz bin Salman, who blamed the retreat in crude prices on a “ploy” by speculators.

Oil prices slumped below $80 a bbl in London last week for the first time since July. Despite geopolitical tensions created by the ongoing conflict between Israel and Hamas, prices fell in a reflection of fears that a darkening economic outlook in China and elsewhere will erode fuel consumption.

In an unusually lengthy commentary section, the report from OPEC detailed an array of “healthy and supportive market fundamentals.”

China’s crude imports are “very healthy,” Asian refining margins are “strong,” physical crude trading and price differentials are “robust” and global demand will increase by a vigorous 2.5 MMbpd this year, it said. Any recent increase in exports from Middle East members reflects normal seasonal trends, the organization added.

Furthermore, OPEC’s data indicates that oil inventories — already below average levels — ought to be depleting this quarter at a record pace of 3 MMbpd. The report did little to reconcile its view of such supply tightness with Riyadh’s policy of constricting production.

“Despite the above healthy and supportive market fundamentals, oil prices have trended lower in recent weeks, mainly driven by financial market speculators,” the report said. OPEC ministers and officials regularly say their output policy isn’t influenced by oil prices.

A further issue may be developing for OPEC in member nation Iraq, where production has edged above its production quota despite the closure of an export pipeline amid a dispute with Turkey. The country pumped 4.33 MMbpd in October, according to the report.

Baghdad and the country’s Kurdish region are continuing talks to restart the link, Iraqi Oil Minister Hayyan Abdul Ghani said in a Telegram post. An agreement could bolster supply levels further, though Iraq has said it’s committed to its OPEC obligations.