November 06, 2023 (MLN): Global oil prices started the week on a positive note as supply concerns rose after top exporters Saudi Arabia and Russia announced that they would stick to extra voluntary oil output cuts until the end of the year.
Brent crude is currently trading at $85.11 per barrel, up by 0.11% on the day.
While West Texas Intermediate crude (WTI) is trading at $80.76 per barrel, up by 0.1% on the day.
It is pertinent to note that both benchmarks dropped by over 4% last week, marking their second consecutive weekly drop as the geopolitical risk premium faded after U.S. diplomats met regional leaders to limit the risk of the Israel-Hamas war causing a wider conflict in the Middle East.
Saudi Arabia confirmed it would continue with its additional voluntary cut of 1 million barrels per day (bpd) in December to keep output at around 9m bpd, a source at the Ministry of Energy said in a statement, as Reuters repoted.
Russia also announced it would continue its additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.
ING analysts said in a note that the oil market will be in surplus in the first quarter of next year, "which may be enough to convince the Saudis and Russians to continue with cuts."
"The market is not pricing in too much geopolitical risk at current levels, so that remains a key upside risk," said Suvro Sarkar, a DBS analyst based in Singapore.
This week, investors are eyeing more economic data from China after the world's second-largest oil consumer released disappointing October factory data last week.
Sydney-based IG analyst Tony Sycamore expects oil prices to be driven by headlines from the Middle East and technical charts this week.
He added that WTI needs to hold above support at $80 a barrel in the early part of this week, otherwise prices could drop to the $77.59 low seen in August.
Sarkar expects Brent to stay supported at $80-85 a barrel, citing the continued supply cuts, the end of rate hikes, and a falling U.S. dollar, after weaker-than-expected U.S. payroll data on Friday.
On Friday, the U.S. House of Representatives passed a bill to bolster sanctions on Iranian oil that would impose measures on foreign ports and refineries that process petroleum exported from Iran if it is signed into law.
DBS' Sarkar said analysts are still watching to see whether the potential law would affect Iran's oil exports. Such sanctions often come with national security waivers, and China could still continue to import Iranian oil.
In the United States, oil rigs fell 8 to 496 last week, their lowest since January 2022, energy services firm Baker Hughes said in its weekly report on Friday.
Copyright Mettis Link News
Posted on: 2023-11-06T10:40:37+05:00
