On November 17, oil prices surged by over 4%, recovering from a four-month low reached the previous day as investors who had placed short positions cashed in and as assistance was provided by US penalties on certain Russian oil shippers. West Texas Intermediate (WTI) crude saw a gain of $2.99, or 4.1 percent, at $75.89, while Brent crude futures ended the day up $3.19, or around 4.1 percent, at $80.61 per barrel.
After the US imposed penalties this week on marine businesses and vessels for shipping Russian oil sold above the Group of Seven’s price threshold, some of the losses were mitigated. Nevertheless, despite this, both benchmarks finished the week more than 1% lower a fourth consecutive weekly decline largely due to a spike in U.S. crude stocks and ongoing record-high production. The decline in prices has forced U.S. oil producers to reduce the number of drilling rigs in operation for almost a full year.
That being said, according to energy services company Baker Hughes, the number of oil rigs increased by six this week, the highest since February. According to some observers, the sharp sell-off on November 16 may have been excessive, especially in light of the U.S. pledging to impose sanctions against Iran, a country that supports Hamas, and the Middle East’s growing tensions that could disrupt oil supply. Many analysts predict that OPEC+, primarily Saudi Arabia and Russia, will prolong output restrictions into 2024 if Brent falls below $80.
The analysts at Goldman Sachs wrote in a letter, “Oil prices are down slightly this year despite demand exceeding our optimistic expectations.” “Non-core OPEC supply has been much stronger than expected, partly offset by OPEC cuts” . The International Energy Agency (IEA) projects that the United States, which accounts for two-thirds of non-OPEC+ growth, will produce annual gains of 1.4 million barrels per day (bpd) for 2023.