Oil prices rise after Saudi Arabia, Russia extend output cuts - Al-Monitor
Oil prices rise after Saudi Arabia, Russia extend output cuts - Al-Monitor: Independent, trusted coverage of the Middle East
Brent crude rose 1% on Monday morning after top oil exporters Saudi Arabia and Russia confirmed that they would continue with their voluntary output cuts until the end of the year, in a move to further tighten supply amid dampened demand.
Industry benchmark Brent crude was $85.66 at 9 a.m. Eastern Time, while West Texas Intermediate crude was also up 1% at $81.33. On Sunday, the two largest producers of the Organization of Petroleum Producing Countries and 10 other allied exporters known as OPEC+, said they would maintain their reduced output.
Saudi Arabia confirmed it would continue its voluntary oil cut of 1 million bpd, meaning the kingdom will have a daily production of around 9 million bpd for December, the Energy Ministry said in a statement.
"This additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," it read.
Riyadh implemented the cut in July, in addition to a broader supply-limiting deal agreed by some members of OPEC+ in April that will extend into 2024. OPEC+ is next due to meet in Vienna on Nov. 26.
Shortly after Saudi Arabia announced the extension Sunday, Russia said that it would continue its voluntary supply cut of 300,000 bpd until the end of December.
Both countries said their cuts would be reviewed next month and that they may choose to deepen, extend or reduce them.
Giovanni Staunovo, a strategist at the Swiss bank UBS, wrote in a research note Monday, “We believe these voluntary supply cuts are likely to be extended into 1Q24 — given seasonally weaker oil demand at the start of every year, ongoing economic growth concerns, and the aim of producers and OPEC+ to support the oil market’s stability and balance.
“We believe this monthly review process allows Saudi Arabia to retain control of the oil market, by adjusting its production due to market fundamentals,” Saunovo added. “Russia’s participation is also important, as the country is the second largest producer in the OPEC+ group. The deal ensures close coordination between the two producers.”
He added that the bank expects Brent to move back into $90-100 territory, supported by lower oil inventories. The OPEC+ group will also closely monitor demand data from China, the world's largest Brent customer, the analyst said.