Oil prices inched higher on Monday as two of the world’s top oil exporters, Saudi Arabia and Russia, reaffirmed their commitment to extended voluntary oil supply cuts until the end of the year. This move provided a boost to global oil markets.
Brent crude futures settled 29 cents, or 0.34%, higher at $85.18 per barrel, while U.S. West Texas Intermediate (WTI) crude rose 31 cents, or 0.4%, to $80.82.
Saudi Arabia confirmed on Sunday that it would continue its additional voluntary cut of 1 million barrels per day (bpd) in December, aiming to maintain its output at around 9 million bpd, according to a statement from the Ministry of Energy. Russia also announced its commitment to an extra voluntary cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.
This decision is seen as a concerted effort to support the tightening of global oil markets and boost oil prices. The move comes after both Brent and WTI crude oil benchmarks suffered losses of approximately 6% in the week ending on November 3, following a slight easing of supply concerns related to Middle East tensions.
Analysts suggest that these voluntary cuts may be extended into the first quarter of 2024 due to seasonally weaker oil demand at the beginning of each year, ongoing economic growth concerns, and the shared goal of oil-producing nations, including OPEC+, to maintain stability and balance in the global oil market.
A weaker U.S. dollar also played a role in supporting oil prices, as a declining dollar boosts demand for crude oil purchases by foreign currency holders. The dollar index hit its lowest level since September 20 at 104.84.
In addition to the supply-side factors, factors such as the pullback of refinery runs at Chinese refineries due to eroding profit margins and the scarcity of export quotas are affecting the oil market. U.S. crude oil refiners are also expected to reduce their operating rates in the current quarter due to weaker gasoline margins and plant maintenance.
Macroeconomic concerns are ongoing in Europe, where data, including the Purchasing Managers’ Index (PMI), indicates a deepening downturn in euro zone business activity. Investors will closely monitor further economic data from China, while in the Middle East, a United Nations agency called for a humanitarian ceasefire, marking a month into the war in Gaza.
These developments highlight the complex interplay of factors that continue to influence the global oil market, with supply cuts and geopolitical tensions on one side and economic concerns and market dynamics on the other.