Oil prices dip as investors brace for OPEC+ output hike
Oil prices fell Friday morning ahead of an expected production increase by OPEC and its allies (OPEC+).
Brent crude oil futures (BZ=F) fell 0.2% to $63.75 per barrel at the time of writing, while West Texas Intermediate futures (CL=F) fell by the same margin to $60.47 per barrel.
OPEC+ will meet on Sunday and there will be news that the group will announce a modest production increase of 137,000 barrels per day (bpd) for December, after agreeing to increase production by the same amount in November.
Warren Patterson, head of commodity strategy at ING, and Ewa Manthey, commodity strategist, said: “Uncertainty regarding sanctions against Russia is also supporting this increase.
“But this move will only strengthen the market’s downward trend and contribute to the significant surplus expected by 2026. Obviously, this assumes there will be no supply shock from Russia.”
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The United States announced sanctions against Russia’s two largest oil companies last week, accusing Moscow of not being committed to the peace process that would end the war in Ukraine.
The US Treasury has announced that sanctions against Rosneft and Lukoil are aimed at increasing pressure on Russia’s energy sector and hindering Russia’s ability to generate revenue to finance the war and support its economy.
Following the announcement, oil prices rose on expectations that it could disrupt and tighten supply in the market. However, prices have since fallen slightly due to declining demand and concerns about oversupply.
Gold prices rose Friday morning as investors digested the outcome of Thursday’s meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea.
Gold futures (GC=F) were up 0.2% to $4,022.10 per ounce at the time of writing, while spot gold was up 0.4% to $4,011.91 per ounce.
The two leaders agreed to a one-year trade truce until November 2026, with the United States dropping tariffs on fentanyl. China, on the other hand, has promised to postpone restrictions on rare earth exports.
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Jim Reid, head of macro and thematic research at Deutsche Bank (DBK.DE), said: “Despite this stability, structural differences remain and it is easy to have some doubts about the scope of the agreement due to the lack of concrete commitments.”
“The sentiment that we are seeing an extended ceasefire rather than a de-escalation was added by the US trade representative [Jamieson] “Greer confirmed last night that the United States will continue its recently opened investigation into China’s compliance with the limited trade agreement reached during Trump’s first term.”
