Oil Prices Consolidate As Attention Turns To OPEC+ Meeting – What’s Next?

There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” for Commodities positioning the entire sector firmly on track to close 2023 as the best performing asset class for a third consecutive year running!

In this year of “unthinkable macro surprises” – traders have turned their attention to the next big money-making opportunity brewing on the horizon: the hotly anticipated OPEC+ meeting.

OPEC+ Meeting Delay Spurs Speculation on Oil Production Cuts Amidst Geopolitical Tensions

Earlier this week, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, announced it would postpone their ministerial meeting – originally planned for Sunday to Thursday November 30.

According to reports, the group was considering a further production cut of up to 1 million barrels a day to help stabilize the market, in addition to Saudi Arabia extending its existing voluntary cuts until the end of the first quarter of 2024.

The cut under discussion, while primarily motivated by the recent pullback in prices, was also designed as a show of influence from the group at a time when many of its Middle Eastern members are angry over the Israel-Gaza war.

Analysts on Wall Street noted that delaying the meeting until Thursday meant a four-day ceasefire agreed between Israel and Hamas on Wednesday will have expired by the time of the high-stakes meeting.

Announcing production cuts when hostilities resume would have far more greater impact on the Oil market and send a powerful message of Arab unity to the White House, which has firmly backed Israel, according to the analysts.

While we may not see a repeat of the Oil shock of the 1970’s, when Arab states halted exports to the west – there is clear evidence that pressure is piling on leaders in the Middle East from their populations to respond to Washington in some form of manner.

With every day that goes by, Saudi Arabia’s breakeven Oil price continues to climb higher due to the unprecedented spending splurge from its Sovereign Wealth Fund on buying expensive footballers and building revolutionary mega cities to host the 2034 football World Cup.

Saudi Arabia’s economic reform programme, known as Vision 2030, requires Oil prices trading close to $100 a barrel with every effort made to maintain this price point throughout 2024.

Meanwhile over in Washington, President Biden is facing a difficult re-election battle next year, possibly against his predecessor Donald Trump and the White House is already struggling to convince voters that the country’s economy is healthy.

Oil prices tend to play an outsized role in voter perceptions of the economy, particularly before an election. Historically, no U.S President has won an election when the price Oil has traded near the $100 a barrel mark.

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