Oil prices rebound as Russia, Saudi Arabia urge OPEC+ to cut production
Oil futures rose for the first time in seven sessions on Friday, with some citing verbal support from Russia and Saudi Arabia. Prices are still falling for 7 consecutive weeks.
price action
West Texas Intermediate crude oil CL00 for January delivery,
+2.71% CL.1,
+2.71% CLF24,
+2.70%
After closing the New York Mercantile Exchange (NYMEX), it rose $1.37 (2%) to $70.71 per barrel. Prices traded 4.6% lower for the week based on front-month contracts. Prices have fallen for seven straight weeks, the longest weekly decline since 2018, FactSet data shows.February Brent crude oil BRN00,
+2.58% BRNG24,
+2.58% ,
ICE Futures Europe’s global benchmark rose $1.42, or 1.9%, to $75.47 a barrel. Brent crude oil and WTI have each recorded losses in the last six sessions.January gasoline RBF24,
+2.79%
It rose 2.1% to $2.0431 per gallon, trading about 3.7% lower this week, and the January heating oil HOF24
+1.54%
It rose 1.4% to $2.5829 per gallon, forecasting a 3% loss for the week.Natural gas NGF24 for delivery in January;
-0.23%
The British Thermal Unit was trading down 1% at $2.56 per million, down about 9% for the week.
market drivers
Oil prices have been under additional pressure since a disappointing OPEC+ meeting on November 30 that proposed more voluntary production cuts in the first quarter of 2024, but traders have questioned whether all countries will comply.
At this meeting, OPEC+ producers agreed to voluntarily reduce about 2.2 million barrels per day (mbd) of crude oil from the market in the first quarter of next year. The commitments include Saudi Arabia’s voluntary 1 million barrel oil production cut and a widely expected 300,000 barrels per day cut in Russian oil exports.
Some believe Friday’s rise in prices was due to verbal support from Russia and Saudi Arabia.
“The rebound follows talks between Russian leader Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, which highlighted ongoing efforts to stabilize global oil markets and manage production levels,” said Stephen Innes, managing director at SPI Asset Management. He said. Client.
The joint statement was issued Thursday after Putin visited Riyadh with the Saudi crown prince. “In the energy sector, both sides highly praised the close cooperation between the two countries and the successful efforts of OPEC+ members to strengthen the stability of the global oil market,” the Kremlin said in a statement.
“They emphasized the importance of continuing cooperation and that all participating countries must adhere to the OPEC+ agreement in a way that serves the interests of producers and consumers and supports global economic growth,” the statement added.
weekly loss
WTI and Brent crude oil both traded more than 4% lower this week, marking their seventh consecutive week of declines, according to FactSet data. This is the longest consecutive weekly decline since 2018 based on front-month contracts.
WTI crude oil is down about 26% since its September peak “as markets are concerned about future global demand amid record U.S. production,” said Violeta Todorova, senior research analyst at Leverage Shares. “Concerns are growing about slowing global growth and the health of the Chinese economy after credit rating agency Moody’s downgraded China’s credit rating from stable to negative.”
But US economic data released on Friday was optimistic. New jobs created in November increased by 199,000. That compares with 190,000 predicted by economists surveyed by the Wall Street Journal.
Despite OPEC+ announcing a voluntary production cut of 2.2 million barrels per day in the first quarter of 2024, “traders are concerned that the cuts are voluntary rather than mandatory, raising questions about whether the cartel will actually be able to follow through.” Todorova said.
Record U.S. oil production and exports of 6 million barrels a day are also “negating” OPEC+’s ability to influence crude prices, Todorova said.
S&P Global Commodity Insights reported Friday that OPEC+ crude oil production fell 110,000 basis points per day (bpd) in November to 42.6 million bpd. Saudi Arabia, OPEC’s biggest producer, kept November output at 9 million bpd following its pledge to voluntarily cut 1 million bpd from June levels.
On Friday, the U.S. Department of Energy announced a solicitation of up to 3 million barrels of oil for delivery to the Strategic Petroleum Reserve in March, part of ongoing efforts to replenish emergency oil reserves following historic declines in the SPR last year. It said it has already purchased nearly 9 million barrels for SPR at an average price of about $75 per barrel.
Meanwhile, oil traders are watching market developments related to Venezuela’s approval of a referendum last weekend to assert sovereignty over Guyana’s oil-rich lands.
read: Impact of Venezuela-Guyana border dispute on oil prices
