Oil prices trade sideways after two-day rally

Global benchmark Brent traded around $83 a barrel after rising nearly 4% in the previous two sessions, while US crude remained below $78. Saudi Arabia, a heavyweight in OPEC+, is pressuring other members to join it in curbing production to prevent a supply surplus from forming again next year, but it is facing pushback from countries such as Angola and Nigeria ahead of the virtual meeting to be held on Thursday.

Delegates said that deeper collective cuts of 1 million barrels per day or more could be considered. Amid abundant supply from outside the producer group, including record exports from the US, a lack of group-wide cuts could lead to further weakness in oil prices after Brent has fallen about 13% in the last two months. The International Energy Agency said earlier this month that the market would return to a surplus next year.

Warren Patterson, head of commodity strategy at ING Groep NV, said, "There are growing expectations that they could make deeper supply cuts. This increased expectation leaves downside risk for the market if OPEC+ disappoints later today."

Analysts including Helima Croft noted in a report that RBC Capital Markets LLC expects OPEC+ to most likely reach an agreement that would allow Angola and Nigeria to begin discussions on production with the wider group.

Citigroup stated in a note that the most likely outcome would be for Saudi Arabia to lift its 1 million barrel-per-day cut in the first quarter of 2024 and for the remaining OPEC+ members to generally stick to their existing quotas for next year. The bank said there is a 20% chance of a deeper cut, which could trigger a $5-per-barrel spike.