Oil prices, which declined on Friday, remained near multi-month lows on Monday as the nagging global oil glut continued to exert its influence. Brent crude oil futures for January delivery were up 4 cents to 44.79 a barrel on Monday. On Friday Brent was at its lowest ebb since August 11 when it reached $44.19.
But in a change to that tune, oil futures saw some resilience after members of the Organization of the Petroleum Exporting Countries (OPEC) indicated they might be closer to inking a deal outlining a reduction in crude output. Brent jumped toward $46 by midday.
Despite the petroleum over-supply, there has been pricing volatility following the unexpected election of Donald Trump as U.S. President. West Texas Intermediate hit lows last Wednesday near $43 per barrel before recovering to $45.27; WTI futures traded in the $43.80 range on Friday. Last week the Baker Hughes rig count showed a jump in 21 of the last 24 months.
Meanwhile all eyes will be on the November 30 OPEC confab in Vienna, where the oil consortium says its cartel expects to come to a member-wide agreement on production cuts. The Paris-based International Energy Agency said that the glut could extend to 2017 should the 14-nation group fails to agree on production cuts. In its haste to build a pricing floor during its September meeting in Algiers, OPEC may have raised unrealistic expectations for uniform production cuts two weeks from now.
JBC Energy, a Vienna-based energy research institute released a report that seemed to confirm conclusions drawn last week by the International Energy Agency--that OPEC members could pump into the glut, not cut back, and expand an existing supply to levels that will become difficult to reduce if demand doesn't significantly increase.
"Oil markets are increasingly reflecting a growing consensus that the persistent over-supply seen throughout 2016 will carry on into 2017," JBC said. In its assessment of OPEC production in October, it cited an existing lack of convergence on production--JBC noted a spike in Nigeria, OPEC's eighth largest producer, to nearly 2 million barrels per day. Libya is expected to boost output in 2017. That's coupled with slow-downs in Iraq, the second largest OPEC producer and number three Iran. However, a wild card is the production spikes in non-OPEC nations: Brazil, Canada, Kazakhstan and Russia.
On Friday, OPEC said that output rose to a record 33.64 million barrels per day in October, up some 240,000 over September.
The surging U.S. Dollar is also a force to be reckoned with. Oil products are traded in Greenbacks and nations with softer currencies will get hit with a price increase as a result, potentially reducing demand. The U.S. Dollar rose to a nine-month high against most. G-10 currencies on Monday.