Oil extends gains as OPEC+ to mull deeper cuts

Oil futures nudged higher on Monday, extending gains on expectations of OPEC+ deepening supply cuts to shore up prices, which have fallen for four weeks on easing concern of Middle East supply disruption amid the Israel-Hamas conflict.

Brent crude futures climbed 57 cents, or 0.7 percent, to $81.18 a barrel by 0400 GMT while US West Texas Intermediate crude was at $76.40 a barrel, up 51 cents or 0.7 percent. The front-month December contract expires later on Monday while the more active January futures gained 55 cents, or 0.7 percent, at $76.59 a barrel.

Both contracts settled 4 percent higher on Friday after three OPEC+ sources told Reuters that the producer group, made up of the Organization of the Petroleum Exporting Countries and their allies including Russia, is set to consider whether to make additional oil supply cuts when it meets on Nov. 26.

Oil prices have dropped by almost 20 percent since late September while prompt inter-month spreads for Brent and WTI slipped into contango last week. Prompt prices are lower than those in future months in a contango market, signalling sufficient supply.

"Our statistical model of OPEC decisions suggests that deeper cuts should not be ruled out given the fall in speculative positioning and in timespreads, and higher-than-expected inventories," Goldman Sachs analysts said in a note.

The bank's baseline forecast is that the existing group production cuts stay fully in place in 2024, and that the unilateral cut of 1 million barrels per day by Saudi Arabia will be extended through the second quarter of next year, and reversed only gradually from July.

IG analyst Tony Sycamore said WTI prices may rise toward $80 a barrel on the back of the possibility that OPEC+ does announce deeper cuts at their upcoming meeting although a drop below $72 will encourage the Biden administration to refill the US Strategic Petroleum Reserve.

"All of which suggest that a rebound in prices is likely in the first half of this week," he added.

Investors are also eyeing disruption in Russian crude oil trade after Washington imposed sanctions on three ships that have sent Sokol crude to India.

On Friday, Moscow lifted a ban on gasoline exports which could add to global supplies of the motor fuel. This comes after Russia scrapped most restrictions on exports of diesel last month.

In the Middle East, US and Israeli officials said a deal to free some of the hostages held in the besieged Gaza enclave was edging closer despite fierce fighting.

US energy firms last week also added oil and gas rigs for the first time in three weeks, said energy services firm Baker Hughes on Friday, with the oil and gas rig count serving as an early indicator of future output.