Oil benchmarks are set to record a seven-week decline, the first time in five years, as worries over supply surplus and weak Chinese demand weigh on prices. However, prices rebounded after Saudi Arabia and Russia persuaded OPEC+ members to participate in output cuts. Brent crude futures and U.S. West Texas Intermediate crude futures experienced an uptick after reaching their lowest points since the end of June. The decline in both benchmarks suggests an oversupply in the market. Additionally, both Brent and WTI are currently trading in contango, indicating that front-month prices are at a discount compared to future prices. The contangoed structure highlights the abundance of available oil, which was further reinforced by OPEC+’s weakened position in providing support. The high levels of US oil production and sluggish Chinese import figures contribute to the oversupply and contangoed structure, according to Tamas Varga of oil broker PVM. However, Varga sees the recent gains as a correction rather than a sustained recovery. Calling for the good of the global economy, Saudi Arabia and Russia, the world’s two largest oil exporters, have urged all OPEC+ members to agree on output cuts. The initiative came shortly after a contentious meeting of OPEC+ producers. In total, OPEC+ members agreed to reduce output by 2.2 million barrels per day during the first quarter of next year. However, Viktor Katona, the lead crude analyst at Kpler, doubts whether the commitments will be fully adhered to. He anticipates a drop of just 350,000 barrels per day in total production from OPEC+ countries from December 2023 to January 2024. Katona attributes potential non-compliance to discrepancies in quota baselines and the dependency on hydrocarbon revenues. The decline in oil prices this week is a result of high US production levels of over 13 million barrels per day and weak Chinese demand. Chinese customs data reveals that crude oil imports in November 2023 decreased by 9% compared to the previous year. This can be attributed to high inventory levels, weak economic indicators, and slowing orders from independent refiners. On the other hand, the United States experienced stronger-than-expected job growth and a decrease in the unemployment rate, indicating resilience in the labor market. This has led to diminished expectations of an early interest rate cut by the Federal Reserve, which could impact markets. In Nigeria, the Dangote oil refinery is preparing to receive its first cargo of 1 million barrels of crude oil. This marks the start of operations that will transform the OPEC member into a net exporter of fuels, after relying heavily on imports in the past.