Crude Oil Market Rises as Russia, Saudi Extend Supply Cuts

By Adedapo Adesanya

The crude oil market gained more than 2 per cent on Thursday as Saudi Arabia and Russia took steps to keep supplies tight into September and possibly beyond.

Brent crude futures rose by $1.94 or 2.3 per cent to settle at $85.14 a barrel, while US West Texas Intermediate (WTI) crude futures appreciated by $2.06 or 2.6 per cent to $81.55 per barrel.

Saudi Arabia said it would extend a voluntary oil output cut of one million barrels per day for a third month to include September, adding it could be extended beyond that or deepened.

Saudi production is expected to be around 9 million barrels per day in September.

Meanwhile, Deputy Prime Minister Alexander Novak said Russia would cut oil exports by 300,000 barrels per day in September.

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed on a broad deal to limit supply into 2024 at its last policy meeting in June, and Saudi Arabia pledged a voluntary production cut for July that it has since extended to include August.

A Joint Ministerial Monitoring Committee panel from OPEC+ is meeting today, with expectations that they won’t likely change the current arrangement.

OPEC+, which pumps around 40 per cent of the world’s crude, has been limiting supply since late 2022 to support the market.

Analysts expect the (OPEC+) meeting to result in the producers’ group continuing the production cuts initially made at its October 5, 2022, meeting and increased on a voluntary basis at its April 3 and June 4 meetings.

The market found its holding in this development despite concerns that some central banks around the world will keep increasing interest rates to reduce inflation, which could slow economic growth and reduce oil demand.

In the US, the number of Americans filing new claims for unemployment benefits rose slightly last week, while layoffs dropped to an 11-month low in July as labour market conditions remain tight.

Pressure also came as the US services sector slowed in July as businesses faced higher prices for inputs even though demand continued to hold up, putting a dent in possible low inflation in the world’s largest economy.

In China, the world’s second-biggest oil consumer, the central bank pledged to guide more financial resources towards the private economy amid weakening economic outlooks.

In the UK, the Bank of England raised its key interest rate by a quarter of a percentage point to a 15-year high of 5.25 per cent, its 14th back-to-back increase, and warned that borrowing costs were likely to stay high for some time.

In Europe, a downturn in euro zone business activity worsened in July as the slump in manufacturing was accompanied by a further slowing of growth in the bloc.