By Adedapo Adesanya
The international benchmark futures, the Brent crude oil, gained 2.03 per cent or 86 cents on Wednesday as leading oil producers, Saudi Arabia and Russia, reportedly reiterated the commitment to abide by the production-cut agreement.
This news was well received by the oil market and pushed the price of the Brent higher to $43.31 per barrel while the United States’ futures, the West Texas Intermediate (WTI) crude, appreciated by 2.06 per cent or 83 cents to $41.03 a barrel.
Saudi Arabia is a top member of the Organisation of the Petroleum Exporting Countries (OPEC) while Russia is the leader of the group’s allies known as OPEC+. Both nations have appealed to fellow oil-producing countries to stick to supply cuts agreed earlier this year so as to help the market.
This came as Crown Prince Mohammed bin Salman, heir to the Saudi throne, and Russian President, Mr Vladimir Putin, spoke on the telephone on the situation of the market.
Both leaders agreed on the importance of all oil-producing countries to continue co-operating and abiding by the OPEC+ agreement to achieve these goals for the benefit of both producers and consumers.
This came as concerns have grown that the coronavirus pandemic could inflict lasting damage as supplies threaten to overwhelm demand. The International Energy Agency (IEA) had warned of limited capacity in the market to take in extra barrels of crude.
A report by the Paris-based agency showed that an acceleration in new COVID-19 cases around the world will dent demand for crude, limiting gains for prices. Total worldwide cases stood at more than 38.6 million on Wednesday.
OPEC’s oil production had risen in September by 160,000 barrels per day. The increase came from Libya and Iran, which are both exempted from the production-cutting deal OPEC signed earlier this year to prop up prices.
Libya restarted production in September and is now pumping 650,000 barrels per day.
The premise also supported reports that Saudi Arabia was considering the postponement of plans for OPEC+ to raise oil production early next year to the end of the first quarter.
This may be confirmed by the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC), which monitors compliance with production cuts, scheduled to meet on Monday, October 19.
The market will also be watching out for numbers from the US Energy Information Administration (EIA) report due out on Thursday. Analysts expect that domestic crude inventories declined by two million barrels for the week ended October 9.
Modupe Gbadeyanka