By Adedapo Adesanya
The crude oil market was relatively stable on Monday after reaching the $90 mark last week for the first time in 10 months following fresh Saudi and Russian production output cuts.
Brent was marginally down by 1 cent yesterday to close at $90.64 per barrel and the US West Texas Intermediate (WTI) crude depreciated by 22 cents to close at $87.29 per barrel.
Saudi Arabia and Russia last week announced that they will extend voluntary supply cuts of a combined 1.3 million barrels per day until the end of the year.
Saudi Arabia’s plan to extend its 1 million barrels per day cut through December reinforces “the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets,” the Kingdom said.
The Kingdom also announced another increase in its official selling prices (OSPs) for its crude going to Asia in October. The price of Saudi Arabia’s flagship crude grade, Arab Light, was raised by $0.10 per barrel to $3.60 a barrel over the Oman/Dubai average, the Middle Eastern benchmark, off which grades going to Asia are being priced.
The extension of the Saudi production cut, and Russia’s pledge to also extend its 300,000 barrels per day export reduction until the end of this year, have pushed Brent oil prices above $90 per barrel for the first time this year.
The market hasn’t seen the full impact of Saudi Arabia’s extra production cut, which could lead to a drastically tighter market if the world’s top crude oil exporter keeps export levels low, according to market analysts.
They noted that Saudi Arabia could be able to single-handedly tighten the market in the fourth quarter, even without the help of other producers in the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), if it keeps export levels as low as it did in August.
The supply cuts overshadowed continuing concern over Chinese economic activity, which has underperformed against expectations despite moves to prop up the world’s largest importer.
On Monday, US Deputy Treasury Secretary Wally Adeyemo said that China’s economic problems were more likely to have a local impact than affect the United States.
Also, support could come to the market as fresh disruption from powerful storms and floods in eastern Libya, in which more than 2,000 people have died, has forced the closure of four major oil export ports since Saturday – Ras Lanuf, Zueitina, Brega, and Es Sidra.
The European Central Bank (ECB) is also expected to announce its interest rate decision this week. On Monday, the European Commission forecast the Eurozone to grow more slowly than previously expected in 2023 and 2024.
In focus, too, are monthly reports from the International Energy Agency (IEA) and OPEC due later this week.
Dipo Olowookere