News

Published: November 7, 2023
Updated: November 7, 2023

Oil Prices Surge on Extended Supply Cuts

Oil prices witnessed a sharp increase on Monday as Saudi Arabia and Russia jointly announced their commitment to extend voluntary supply cuts until the end of the year.

Brent Crude Futures Rise

Brent crude futures saw a significant rise, increasing by $1.25, or 1.47%, reaching $86.14 per barrel by 1145 GMT. This development reflects the impact of the agreement on the global oil market. US West Texas Intermediate crude also increased by $1.29, or 1.6%, reaching $81.80.

Recent Price Fluctuations

It's important to note that both oil benchmarks had experienced a decrease of approximately 6% during the week leading up to November 3.

Saudi Arabia's Commitment

Saudi Arabia confirmed its intention to maintain an additional voluntary cut of 1 million barrels per day (bpd) for December, with the aim of stabilising output at around 9 million bpd.

Russia's Pledge

Russia, on the other hand, pledged to continue its additional voluntary cut of 300,000 bpd in both crude oil and petroleum product exports until the end of December.

Market Impact

The announcement by these major oil-producing nations came in response to multiple factors, including the fading "Israel-Hamas war premium" and concerns about weakening global demand, which had led to the 6% decline in oil prices the previous week.

Other Market Developments

Saudi Aramco made the decision to keep its December selling prices for two of its five oil grades unchanged for Asian customers. However, the prices for Europe were reduced.

War in the Middle East

Initially, the conflict between Israel and Hamas led to a surge in crude oil prices. However, as the situation in the Middle East stabilized, the price gains were nearly reversed, as the oil supply from the region remained largely unaffected.

Global Markets remain stable amidst Israel offensive

In global financial markets, stock and bond markets in Europe remained relatively stable after a rally the previous week. US futures added approximately 0.2%, and the MSCI's world index increased by 0.36%, marking its sixth consecutive session of gains.

Last week, the benchmark US 10-year yields experienced a significant drop of around 29 basis points (bps), the most substantial weekly decline since March.

The extension of voluntary supply cuts by Saudi Arabia and Russia has had a notable impact on oil prices. While this decision has provided a boost to the market, it comes in response to a range of factors influencing oil prices in recent weeks. These include geopolitical events, concerns over global demand, and the evolving dynamics of the oil market.