Oil Rises as Global Supplies Tighten Further
By Adedapo Adesanya
Oil rose by 1 per cent as top producers like Saudi Arabia and Russia extended supply cuts through September, adding to undersupply concerns.
Brent moved up by 1.3 per cent or $1.10 to $86.24 a barrel, while the US West Texas Intermediate (WTI) crude appreciated by 1.6 per cent or $1.27 to $82.82 a barrel.
Saudi Arabia on Thursday extended a voluntary oil production cut of 1 million barrels per day to the end of September, keeping the door open for another extension.
As it took the decision, Russia also elected to reduce its oil exports by 300,000 barrels per day next month.
With the production cut extended, market analysts anticipate a market deficit of more than 1.5 million barrels per day in September, following an estimated deficit of around 2 million bpd in July and August.
The Joint Ministerial Monitoring Committee (JMMC) of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) affirmed on Friday the current levels of oil production of the group and didn’t make any recommendation to change the output at this time.
In a very short meeting, the JMMC panel, which regularly discusses the situation on the market and the need for OPEC+ intervention, authorised the OPEC+ decisions from June 4, when the current cuts which were initially set for May through December 2023 – were extended to the end of 2024.
The OPEC+ panel agreed there was no need for further market intervention at present, as widely expected. But the panel noted that it could intervene if necessary.
“The committee will continue to closely assess market conditions noting the willingness of the DoC countries to address market developments and stand ready to take additional measures at any time, building on the strong cohesion of OPEC and participating non-OPEC oil-producing countries,” OPEC said in a statement after the short panel meeting.
The panel also “reiterated its appreciation” to Saudi Arabia for the extension of its unilateral cut into September, “aimed at supporting the stability of the oil market,” and acknowledged Russia’s commitment to cut oil exports in September by 300,000 barrels per day.
The next meeting of the JMMC is scheduled to take place on October 4, 2023.
On the demand front, global oil consumption could grow by 2.4 million barrels per day this year, Russian Deputy Prime Minister Alexander Novak said on Friday after the meeting.
In the week, the US Energy Information Administration (EIA) reported that the country’s crude oil inventory declined by a record 17 million barrels last week, a record level.
However, data released on Friday which showed the US economy maintained a moderate pace of job growth in July, weighed on prices. Despite this, solid wage gains and a decline in the unemployment rate pointed to continued tightness in labour market conditions in the world’s largest economy.
Additionally, the downturn in euro zone business activity worsened more than initially thought in July, and the Bank of England raised its interest rate to a 15-year peak on Thursday.