Oil prices rebounded on Friday but posted a third monthly decline in a row, capping a volatile trading session set off by reports that the US was ready to attack Venezuela.
Media reports claimed that Washington was prepared for an air strike against Opec's ninth-biggest producer, after the Pentagon said it had sent warships to the Caribbean and F-35 stealth warplanes to Puerto Rico, in addition to an aircraft carrier strike group en route to the Caribbean.
However, the Pentagon said the fleet was there to cut drug trafficking. US President Donald Trump denied an attack was imminent, while Secretary of State Marco Rubio said the reports were fake.
Earlier in the day, crude prices were trading lower on a weaker dollar and before an Opec+ meeting in which the production alliance is expected to increase output again.
Brent, the benchmark for two thirds of the world's oil, added 0.62 per cent to settle at $64.77 a barrel. West Texas Intermediate, the gauge that tracks US crude, slipped 0.68 per cent to close at $60.98 a barrel.
On a weekly basis, Brent and WTI retreated nearly 1 per cent, after posting their biggest weekly gain since June last Friday.
From the end of September, they slipped 2 per cent and 2.2 per cent, respectively. Year-to-date, Brent has retreated more than 13 per cent, while WTI has slid about 15 per cent.
Opec+, led by Saudi Arabia and Russia, this month agreed to another output increase for November as the supergroup of oil producers continued to unwind production cuts put in place two years ago.
The group – which also includes the UAE, Kuwait, Kazakhstan, Iraq, Algeria and Oman – would be boosting production for the ninth month in a row as it focuses on regaining market share and supporting the growth of its economies.
The market is also keeping tabs on the effects of the latest western sanctions on Russia’s two largest oil companies over the Ukraine war, which have raised supply concerns.
Analysts, however, have previously told The National that the oil glut is “exaggerated” and demand continues to remain strong.
RBC Capital Markets expects Opec+ to opt for another modest 137,000 barrel-a-day increase for December despite the sanctions on Rosneft and Lukoil.
“While we think that the sanctions on the two Russian oil exporters will prove material if enforced, we do not think Saudi Arabia and its Opec partners would look to surge output before seeing clear evidence of supply disruption,” said Helima Croft of RBC.
“While the White House might like Saudi Arabia to accelerate the return of supply to the market, any move to do so would leave very thin spare capacity buffers to offset any additional outages.”
However, the new sanctions are unlikely to create a major supply shock as Russia is expected to continue to sell oil in global markets.
Between 500,000 to 600,000 bpd of Russian oil production is at risk of being curtailed following the US move, Rystad Energy estimates.
“If the Opec+ producers do indeed opt for another 137,000-bpd increase, the actual addition will be much smaller than the headline figure, as most of the producers are nearly maxed and Saudi Arabia is the only country with substantial spare capacity,” Ms Croft of RBC said.
Oil prices were also affected by the stronger dollar, boosted by Federal Reserve Chair Jerome Powell's comments that another interest rate cut was guaranteed in December, after the US central bank slashed rates again this week.
Crude prices were also hit by economic data from China, which indicated factory activity in the world's second-biggest economy had declined for a seventh consecutive month in October. China is the biggest importer of oil in the world.
“Supply should outstrip demand as Opec+ spare capacity returns, pressuring commodity prices and sector EPS [earnings per share],” analysts at Swiss bank Lombard Odier said.
