(Bloomberg) -- Oil extended gains as traders boosted bets that the OPEC+ alliance will intervene in the market to bolster prices.
West Texas Intermediate rose 2.3% to settle above $77 on speculation that Saudi Arabia and its allies may deepen production cuts when they gather on Nov. 26. The commodity erased more than 50 cents in gains in the minutes before the market closed as traders engaged in late-day profit taking. Earlier in the session, the dollar weakened to the lowest level since September, making commodities priced in the currency more attractive. The US benchmark crude future's December expiry on Monday also contributed to high volatility.
Crude is down 3.3% for the year following a run of four weekly losses that were driven by concerns about robust supplies outside the OPEC+ coalition. Hedge funds have slashed their bets on oil to the least bullish in 20 weeks amid large inventory builds.
Meanwhile, US crude's weakening timespreads flashed signs of oversupply in a bearish market structure called contango. Brent also ended the session with shorter-dated contracts trading at a discount to longer-dated ones.
To shore up sentiment, the Organization of Petroleum Exporting Countries and allies are expected to at least reaffirm existing production quotas for 2024. Group leader Saudi Arabia is widely predicted to extend its extra 1 million barrel-a-day cutback into early next year.
“We're retracing some of the losses last week on ideas the selloff by fund liquidation was probably overexaggerated,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. The possibility of extended cuts following the upcoming OPEC+ meeting “is keeping the buyers present today.”
In the Middle East, meanwhile, shipping risks were in focus after a Japanese-chartered vessel was seized in the Red Sea by Iran-backed Houthi rebels. Tokyo-based Nippon Yusen KK said the Galaxy Leader, a vehicle carrier, was taken in the southern part of the waterway on Sunday.
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