Oil prices flat, OPEC may cut output cut

SINGAPORE Oil prices were not changed during Asian trade on Friday, although they were headed for their first weekly gain in five weeks, underpinned by a weaker U.S. dollar and the possibility that OPEC may agree to cut crude output when it meets on October 5.

The price of crude futures for November went down 10 cents or 0.1 per cent to $88.39 a barrel by 0303 GMT, after losing 83 cents in the previous session. The more active contract for December was unchanged at $87.18.

U.S. West Texas Intermediate WTI crude futures for November delivery rose by 0.1 per cent or 9 cents to $81.32 a barrel, after falling 92 cents in the previous session.

Edward Moya, senior analyst with OANDA, said that a deteriorating crude demand outlook won't allow oil to rally until energy traders are confident that OPEC will slash output at the October 5th meeting.

The dollar is going to soften as the dollar goes into the quarter-end, which is a weakness with crude prices. After hitting nine-month lows earlier in the week, both Brent and WTI are on track to rise by about 3 per cent for the week, their first weekly rise since August.

Oil prices went up after a drop in the dollar from 20 year highs earlier in the week. A weaker dollar makes dollar-denominated oil cheaper for buyers holding other currencies, which improves demand for the commodity.

The price of oil is set to drop by 8.4 per cent for all of September, down for a fourth month. Brent has lost 23 per cent of its first quarterly loss since the fourth quarter of 2021 and plunged 23 per cent during the third quarter.

WTI is set to fall by 9.3 per cent in September, its fourth monthly decline, and it dropped by 23 per cent during the quarter, the first quarterly slump since March 2020 when COVID 19 slammed demand.

Analysts said the market appeared to have found a floor, with supply tightened as the European Union bans Russian oil imports from December 5. The key question is how much demand will drop as global growth slows in the face of aggressive interest rate hikes.

I still think prices are going to move higher from here on tightening Russian sanctions, as well as low global crude inventories, and the SPR U.S. Strategic Petroleum Reserve supplies falling off, according to National Australia Bank commodities analyst Baden Moore.

He said that OPEC is well positioned to manage supply to offset risks to demand.

Three people told Reuters that the Organization of the Petroleum Exporting Countries OPEC and allies led by Russia have begun talking about an output cut ahead of their meeting on Wednesday.

A person familiar with Russian thinking on the matter said earlier this week that Russia could suggest a cut of up to 1 million barrels per day.

In August, OPEC production was estimated to be around 3.37 million barrels per day less than target production levels. Any cut in supply will likely be smaller than whatever figure the group announces, said ING Economics in a note.