Oil prices traded around six-month lows on Friday, with the talk of $100/barrel seeming a distant memory.
Brent crude was trading around $75/barrel while West Texas Intermediate has pushed back above $70/barrel after falling below earlier this week.
The reversal in fortunes has followed a marked change in supply and demand expectations for oil as concerns over economic growth mount and US oil production hits record levels.
Opec had hoped that production cuts would support the oil price but the voluntary nature of the reductions left the market unsure whether they would happen.
Concerns over demand have risen as growth in China has stalled and looks set to slow in the US.
Moody’s this week lowered its outlook on China and nerves surrounding the country’s property sector continue to undermine sentiment.
Meanwhile, the US economy looks set to cool after its stellar growth in the third quarter suggesting demand for oil from the two biggest economies in the world could drop.
This comes at a time when US oil production hit a fresh all-time high of 13.2 million barrels a day in September, according to figures from the US Energy Information Administration.
The US accounts for 80% of the expansion in global oil supply this year, according to the International Energy Agency.
The fall in the oil price has been pronounced since OPEC+ announced a combined 2.2 million barrels per day in voluntary output cuts for the first quarter of next year.
Fiona Cincotta, senior financial market Analyst at City Index said the “voluntary element of the deal left the markets questioning whether the supply reduction would actually come into effect.”
The oil price has seen support today after Saudi Arabia and Russia, the two biggest oil exporters, called for all OPEC+ members to join an agreement on output cuts for the good of the global economy.
Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met on Wednesday to discuss further oil price cooperation, while OPEC+ member Algeria said it would not rule out extending or deepening oil supply cuts.
JPMorgan sees $70/barrel Brent as the lower end of the price range and believes OPEC unity remains intact.
It said that if Saudi Arabia were to return the 1 million barrels per day production cuts in 2024, “it won’t be due to group tensions but rather strong demand.”
Looking at oil major share prices, JPM said: “We believe periods of elevated volatility in 2024 offer long-term investors a unique buying opportunity.”
It estimated the oil major's share prices currently discount around $65/barrel Brent which makes “us buyers of dips led by OPEC policy and/or looser near-term balances on supply upside.”
Its key European picks Eni, Shell, Total and Neste – all rated ‘overweight’.
BP continues to be rated ‘underweight’.