Oil extends gains on expectations of further OPEC+ supply cuts

Oil futures edged higher on Monday, extending gains on expectations of OPEC+ deepening supply cuts to shore up prices, which have fallen for four weeks on easing concern of Middle East supply disruption amid the Israeli war on Gaza.

Brent crude futures climbed 66 cents, or 0.8%, to $81.27 a barrel by 0700 GMT while U.S. West Texas Intermediate crude was at $76.49 a barrel, up 60 cents or 0.8%.

The front-month December contract expires later on Monday while the more active January futures gained 65 cents, or 0.9%, at $76.69 a barrel.

Both contracts settled 4% higher on Friday after three OPEC+ sources told Reuters that the producer group, made up of the Organization of the Petroleum Exporting Countries and their allies including Russia, is set to consider whether to make additional oil supply cuts when it meets on Nov. 26.

Oil prices have dropped by 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.

IG analyst Tony Sycamore said WTI prices may rise toward $80 a barrel on the back of the possibility that OPEC+ does announce deeper cuts at its upcoming meeting though a drop below $72 will encourage the Biden administration to refill the U.S. Strategic Petroleum Reserve.

“All of which suggest that a rebound in prices is likely in the first half of this week,” Sycamore said.

Investors are also eyeing disruption in Russian crude oil trade after Washington imposed sanctions on three ships that have sent Sokol crude to India.

On Friday, Moscow lifted a ban on gasoline exports which could add to global supplies of the motor fuel. That came after Russia scrapped most restrictions on exports of diesel last month.

U.S. energy firms last week also added oil and gas rigs for the first time in three weeks, said energy services firm Baker Hughes on Friday. The oil and gas rig count serves as an early indicator of future output.