Concerns over shortages keep oil prices high as Saudi Arabia and Russia stand firm on supply cuts
Oil prices have ticked up in this morning’s trading after Russia and Saudi Arabia, two of the world’s biggest importers, confirmed plans to sustain hefty output cuts.
The two countries first made additional voluntary pledges this summer to slash a further 1.3m barrels per day from global markets, and have now committed to the unilateral measures until the end of the year.
This has fuelled concern over supply shortages, keeping prices elevated, with Brent Crude up 0.7 per cent to $85.49 per barrel and WTI Crude rising 0.82 per cent to $81.17 per barrel.
Saudi Arabia will be responsible for additional voluntary cuts of one million barrels per day — while Russia has slashed roughly 300,000 barrels per day from its output.
The decision will be reviewed again later this month with OPEC and its allies including Russia, known as OPEC+, set to meet in Viena on 26 November.
The world’s largest oil cartel has committed to its own cuts of roughly five million barrels per day, around five per cent of global supplies, for nearly a year in its bid to prop up prices amid waning demand in China and an easing energy crisis.
Nevertheless, prices are down week-on-week, with Brent trading at $88 per barrel last Monday.
They are also well below the yearly high hit in last month’s mega-rally when Brent peaked at nearly $98 per barrel.
This comes with central banks maintaining high-interest rates to tame inflation, including the US Federal Reserve and Bank of England, which has a cooling effect on demand.
Although fears over disruption to supplies and sanctions remain as conflict continues between Israel and Hamas, the lack of international escalation has reduced fears of supply shortages driven by the war.
Craig Erlam, senior market analyst at Oanda, said: “All of this softer data may have come as a relief to Fed policymakers but it’s weighed on crude oil, with a weaker economy meaning softer demand. WTI is now trading back at the level it was before Hamas attacked Israel, while Brent still has a little way to go.
“That will, to some extent, be due to the fact that it hasn’t yet led to a more significant conflict in the Middle East — a hugely important region for oil output – as well as weaker economic prospects.”