Oil Prices Rise as Saudi Arabia and Russia Confirm Extended Production Cuts

Oil prices saw an uptick on Monday as both Saudi Arabia and Russia affirmed their commitment to additional voluntary oil supply cuts until the end of the year.

Brent crude oil, against which Nigerian oil is priced, grew by 29 cents, or 0.34% to $85.18 a barrel while U.S. West Texas Intermediate crude gained 31 cents, or 0.4% to settle at $80.82.

Saudi Arabia’s decision to continue an additional voluntary cut of 1 million barrels per day (bpd) in December and maintain output of around 9 million bpd has been met with approval as Russia has also announced it would extend its extra voluntary cut of 300,000 bpd in crude oil and petroleum product exports through December.

These measures aim to tighten oil markets and boost prices, reinforcing the stability and balance sought by producers and OPEC+.

Experts suggest these cuts might be extended into the first quarter of 2024 due to concerns related to seasonally weaker oil demand at the year’s outset, ongoing economic uncertainties, and a commitment to market stability.

After both benchmarks lost about 6% during the week ending November 3, this news provided relief. Reduced supply concerns driven by a lessening of Middle East tensions also contributed to the rebound.

A weaker dollar further supported oil prices as the dollar index reached its lowest point since September 20. A weaker dollar increases demand for crude among foreign currency holders.

Nevertheless, oil prices were affected by the easing of crude throughput at Chinese and U.S. refineries. Chinese refineries reduced their operations due to lower profit margins and limited export quotas, while U.S. refineries are expected to decrease their output in response to weak gasoline margins and scheduled plant maintenance.

Investors will be closely monitoring economic data from China, while macroeconomic concerns persist in Europe, especially related to the downturn in euro zone business activity and the potential effects of decisions by central banks like the Bank of England on future oil demand.