Oil up as Saudi Arabia and Russia stick to supply cuts

UBS strategist says supply cuts can go on until Q1 of 2024

Reuters November 07, 2023
Saudi Arabia confirmed on Sunday it would continue with its additional voluntary cut of 1 million barrels per day (bpd) in December. PHOTO: Reuters/FILE


Oil prices rose on Monday after top exporters Saudi Arabia and Russia reaffirmed their commitment to extra voluntary oil supply cuts until the end of the year.

Brent crude futures rose $1, or 1.2%, to $85.89 a barrel by 17:13 GMT, while US West Texas Intermediate crude was up $1.11, or 1.4%, at $81.62.

Saudi Arabia confirmed on Sunday it would continue with its additional voluntary cut of 1 million barrels per day (bpd) in December to keep output around 9 million bpd, a ministry of energy source said.

Russia also announced it would continue its additional voluntary cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.

“Russia and Saudi have an iron clad agreement to stay with the same supply constraints into the end of the year, and yet demand for fuel continues to be stronger than most analysts have anticipated, keeping a good bid underneath the crude prices,” said Dennis Kissler, Senior Vice President of trading at BOK Financial.

Read Oil steadies as supply cuts face surprise

The cuts could be extended into the first quarter of 2024 because of “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”, said UBS strategist Giovanni Staunovo. Oil prices rebounded after both benchmarks lost about 6% in the week to November 3 as supply concerns driven by Middle East tensions eased.

Monday’s oil price gains may have been capped by an easing of crude throughput at Chinese refineries.

Refinery runs are easing from record levels in the third quarter because of eroding profit margins and a scarcity of export quotas to the end of the year, traders and industry consultants told Reuters.

“The reaction to the Saudi and Russian decisions over the weekend to extend their respective output and exports cuts throughout December has been, to some extent, countered by the anticipated fall in China’s refinery throughput this month,” said PVM analyst Tamas Varga.

Published in The Express Tribune, November 7th, 2023.

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