Top Oil Exporters Extend Output Cuts: Top oil exporters Saudi Arabia and Russia pledged to prolong their voluntary oil output limits until the end of the year, raising oil prices somewhat on Monday. This plan tries to keep oil supplies tight while markets worry about tighter U.S. sanctions on Iranian oil.
Brent crude futures saw a rise of 41 cents, equivalent to 0.5%, reaching $85.30 a barrel, while U.S. West Texas Intermediate crude was at $81.05 a barrel, up by 54 cents or 0.7%. Saudi Arabia confirmed its plan to continue the additional voluntary cut of 1 million barrels per day (bpd), resulting in December production of around 9 million bpd, in line with analysts’ expectations.
In response to Saudi Arabia’s commitment, Moscow also announced its intention to prolong its additional voluntary supply cut of 300,000 bod from its crude oil and petroleum product exports until the end of December. Last week, both contracts experienced their second weekly decline, dropping approximately 6%. This was primarily due to the reduction of geopolitical risk premiums, which had previously been linked to concerns of supply disruptions resulting from a potential expansion of conflict in the Middle East.
Over the weekend, Israel rejected international pressure for a ceasefire, while the top U.S. diplomat worked to manage a crisis that could escalate tensions in neighbouring Lebanon. “The risk premium associated with the geopolitical backdrop has completely vanished after two weeks of volatile prices.” They noted that “the market’s focus has turned to the demand outlook, which remains uncertain.”
Also Read: Oil Prices Rebound Amid Middle East Tensions
In the upcoming week, investors are closely watching economic data from China, the world’s second-largest oil consumer, following disappointing October factory data released last week.
Sydney-based IG analyst Tony Sycamore anticipates that oil prices will be influenced by developments in the Middle East and technical chart patterns in the coming days. He stressed that West Texas Intermediate crude needs to hold above the support level at $80 a barrel early in the week; otherwise, prices could drop to the August low of $77.59.
On Friday, the U.S. House of Representatives passed a bill aimed at strengthening sanctions on Iranian oil. If signed into law, this bill would impose measures on foreign ports and refineries processing petroleum exported from Iran.
In the United States, the number of oil rigs fell by 8 to 496 last week, marking the lowest count since January 2022, according to the weekly report from energy services firm Baker Hughes.
Our Reader’s Queries
What is the OPEC oil production cut for 2023?
In addition to the previously announced voluntary cut of 500 thousand barrels per day by the Russian Federation from January to March 2024, there will be an additional cut. This cut will be based on the average export levels of May and June 2023 and will consist of 300 thousand barrels per day.
Will OPEC cut production further?
In a significant move, OPEC+ members including Saudi Arabia and Russia have agreed to implement voluntary output cuts for the first quarter of 2024. This decision is expected to have a positive impact on the global oil market and help stabilize prices. The move is a clear indication of the commitment of OPEC+ members to maintain a balance between supply and demand in the oil market. With this decision, the group has once again demonstrated its ability to work together and take decisive action when needed.
Did Saudi Arabia and Russia agree to cut oil production?
After a week of intense negotiations, the group has finally agreed to make significant cuts. Despite widespread skepticism, Saudi Arabia has pledged to maintain its current 1 million b/d voluntary cuts until the first quarter of 2024. Meanwhile, Russia has decided to extend and deepen its supply cut for the same duration. These commitments are a positive step towards stabilizing the oil market and ensuring a sustainable future for the industry.
Why are Saudis cutting oil production?
Saudi Arabia and Russia have decided to cut their oil output by one million and 300,000 barrels a day respectively, in an effort to boost oil prices. The voluntary cuts were initially announced by the Saudis earlier this summer and have been extended on a monthly basis. This move is aimed at supporting the oil market and ensuring that prices remain stable.