Investor Alert

New York Markets After Hours

Futures Movers

Oct. 1, 2021, 3:10 p.m. EDT

Oil futures gain Friday and for week, ahead of Monday’s OPEC+ decision on output

By Myra P. Saefong and Mark DeCambre

Oil futures finished higher on Friday, building on a gain for the week, as traders weighed possible outcomes for Monday’s expected decision by OPEC and its allies on crude production levels.

The group of oil producers, together known as OPEC+, will meet Monday, and “production quotas could be revised higher amid indications of rising global demand,” Marshall Steeves, energy markets analyst at IHS Markit, told MarketWatch.

On Thursday, Reuters reported that the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, is weighing additional production increases, “beyond its existing deal to boost production by 400,000 barrels per day,” as prices for crude trade near year three-year highs.

The group had been widely expected to keep current plans to raise overall production by 400,000 barrels a day each month in place.

See : Why OPEC+ is likely to keep its plan to boost oil output

“While OPEC+ may decide to increase quotas, some members are unable to meet their individual quotas,” said Steeves. “Ministers may decide to leave quotas unchanged so as to support current price levels.”

November West Texas Intermediate crude  rose 85 cents, or 1.1%, to settle at $75.88 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since October 2018, according to Dow Jones Market Data. The December Brent contract , the global benchmark, added 97 cents, or 1.2%, to settle at $79.28 a barrel on ICE Futures Europe.

For September, WTI gained 9.5%, while Brent saw a rise of 7.6%, based on the front-month contracts, according to Dow Jones Market Data. For the quarter, WTI climbed of 2.1%, up a sixth consecutive quarter, while Brent marked a 4.5% advance.

Reports on OPEC+’s plans and a surprise jump in U.S. inventories have combined to weigh on crude prices for the week, analysts said. Prices, however, still tallied a gain from last Friday’s close.

Based on the front-month contracts, WTI crude futures rose 2.6% and Brent crude ended nearly 2.7% higher for the week.

“Traders were surprised by a build of crude stocks in the U.S. and are pricing in reports that OPEC+ may consider an option to hike output more than planned in its coming meeting,” wrote Louise Dickson, senior oil markets analyst at Rystad Energy, in a Friday note.

Energy Information Administration data Wednesday  revealed a weekly rise of 4.6 million barrels  in U.S. crude inventories after seven consecutive weeks of declines on the back of storm disruptions in the Gulf of Mexico.

“Building inventories triggered an alarm for markets, especially at a time when Brent exceeded $80 per barrel, and traders question how justified this new threshold is,” wrote Dickson. “If OPEC+ sticks to the plan, then we shouldn’t see much downside, but reports indicate that talks are open to other scenarios too,” the analyst wrote.

Data from Baker Hughes (NAS:BKR) on Friday implied future gains in crude production, with the number of active U.S. oil rigs up by seven at 428 this week. That marked a fourth-weekly climb in a row.

On Thursday, a report that China told state-owned energy companies to build their reserves to meet power needs for the winter. Analysts suggested that the move may lead to more demand for oil as the market moves away from high-priced coal and natural gas.

Among the petroleum products traded on Nymex Friday, November gasoline added nearly 2.6% to $2.25 a gallon and November heating oil rose 1.9% to $2.383 a gallon. Both contracts saw prices rise more than 5% for the week.

November natural gas fell 4.2% to $5.619 per million British thermal units. Prices were up just over 8% for the week, after ending September with a gain of 34%.

Natural-gas futures rallied on Thursday despite the close-to-expected storage build in the latest week for U.S. inventories, but as global demand remains high, said Steeves. U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 88 billion cubic feet for the week ended Sept. 24.

“Storage remains relatively tight overall,” said Steeves. “With demand for U.S. natural gas exports high as the shoulder season begins with storage levels tight, the IHS Markit outlook for natural gas remains neutral to bullish.”

Link to MarketWatch's Slice.