Adedapo Adesanya
By Adedapo Adesanya
Crude oil prices fell further on Wednesday as fears of disruption to supplies due to conflict in the Middle East receded a day as Saudi Arabia and Russia pledged to help stabilise the market.
Brent futures dropped $1.83 or 2.1 per cent to settle at $85.82 a barrel while the US West Texas Intermediate (WTI) crude was down by $2.48 or 2.9 per cent to quote at $83.49 a barrel.
Brent and WTI had surged more than 4 per cent on Monday as the clashes raised fears that the conflict could spread beyond Gaza but bounced off session lows as concerns eased about potential supply disruptions from the battle.
Prices then settled slightly lower on Tuesday after Saudi Arabia said it was working with regional and international partners to prevent an escalation, and reaffirmed its efforts to stabilise oil markets.
Despite the drop, trades are watchful as the matter could escalate into a broader conflict that would disrupt the global oil supply.
Analysts warned that oil prices could reach $100 a barrel if the situation in the Middle East escalates further.
Russia and Saudi Arabia met in Moscow on Wednesday, when Russian President Vladimir Putin said that coordination between the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ will continue for the predictability of the oil market.
Saudi Arabia is maintaining a voluntary cut of 1 million barrels per day until the end of 2023, while Russia is also keeping a 300,000 barrels per day voluntary export curb until the end of December.
OPEC+ members, he said, would “fulfil their commitments in full and successfully cope with all challenges.”
He also said that the OPEC+ agreement to cut supply would likely be extended if there is consensus.
“It looks like we will continue our cooperation,” he added.
The remarks are Putin’s strongest signal to date that OPEC+ supply cuts will endure well into 2024 and probably beyond – a step that is almost certain to support oil prices.
Mr Putin also urged companies to prioritise the Russian domestic market. The country’s ban on gasoline and some diesel exports was rolled back again last week as diesel exports that arrive at ports by pipeline were permitted.
Producer prices increasing more than expected in September in the US amid higher costs for energy products and food could not save the downward move in the price of the commodity.
US investors will be looking at the details of the Federal Reserve’s September policy meeting minutes released on Wednesday for clues on future interest rate decisions.
Interest rate hikes to tame inflation can slow economic growth and reduce oil demand.
In Europe, the German government confirmed it expects the economy to contract by 0.4 per cent this year because of persistently high inflation.
