By Adedapo Adesanya
The prices of oil benchmarks jumped by 2 per cent on Tuesday on the fresh possibility that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will extend or deepen supply cuts.
Data showed that Brent crude futures gained $1.70 or 2.1 per cent to close at $81.68 a barrel and the US West Texas Intermediate (WTI) crude increased by $1.55 or 2.1 per cent to $76.41 per barrel after a drop in Kazakh oil output and a weaker US Dollar.
OPEC+ is due to hold an online ministerial meeting on Thursday to discuss 2024 production targets.
The alliance, after long negotiations in June, extended oil output cuts of 3.66 million barrels per day or about 5 per cent of daily global demand until the end of 2024.
In addition, Saudi Arabia is making a 1 million barrels per day voluntary reduction in output until the end of December 2023 while Russia is also cutting oil exports of 300,000 barrels per day until the end of the year.
Targets for several African members were reduced for 2024 to bring them in line with declining production levels. The agreement also allows the United Arab Emirates, which has been boosting its production capacity, to increase output in 2024.
Angola and Congo are pumping below their 2024 targets due to falling capacity, while Nigeria has moved closer to, or surpassed its 2024 target in recent months, according to some assessments.
Oil also found support from a weak Dollar, an expected decline in US crude inventories, and the drop in Kazakh output.
Kazakhstan’s largest oilfields have cut their combined daily oil output by 56 per cent after a severe storm in the Black Sea region disrupted up to 2 million barrels per day of oil exports from Kazakhstan and Russia.
Unlike Russia, Kazakhstan doesn’t have many alternative export routes for its oil and the disruption is expected to lower the country’s oil production by 631,700 metric tons this week. It was unclear when the situation would normalise while Russia’s Black Sea port of Novorossiysk, the largest Black Sea outlet for oil and products, remained closed for loadings on Tuesday.
The US Dollar sank to a three-month low on Tuesday after an official of the US Federal Reserve flagged the possibility of lowering the Fed policy rate in the months ahead if inflation declines further.
A weaker Dollar typically bolsters oil demand, making dollar-denominated oil less expensive for buyers using other currencies.
Crude oil inventories in the United States fell this week by 817,000 barrels for week ending November 24, according to The American Petroleum Institute (API), after a 9.05-million-barrel rise in crude inventories in the week prior.
