Futures Movers: Oil prices rise after Saudi Arabia, Russia extend production cuts

Posted By: EN Todayon: November 06, 2023In: General Energy News, Oil & Gas News

Oil futures rose Monday after Saudi Arabia and Russia, as expected, confirmed they would extend production cuts through the end of December, while investors continue to monitor the Israel-Hamas war for potential spillovers that could affect crude supplies.

Price action

West Texas Intermediate crude for December delivery
CL00,
+1.09%

CL.1,
+1.09%

CLZ23,
+1.09%
rose $1.42, or 1.8%, to $81.93 a barrel on the New York Mercantile Exchange.
January Brent crude
BRN00,
+0.91%

BRNF24,
+0.91%
gained $1.38, or 1.6%, to $86.27 a barrel on ICE Futures Europe.

Market drivers

Saudi Arabia on Sunday confirmed it would extend a production cut of 1 million barrels a day, which first took effect in July. In a statement citing an Energy Ministry official, Saudi Arabia said it would extend the cut through next month, affirming a September announcement that had said it would keep the cut in place through the end of 2023.

The statement said Saudi production would be approximately 9 million barrels a day in December. Russia on Sunday reportedly said it would also extend a cut of 300,000 barrels a day through the end of December.

“The confirmation from these producers that they would continue with cuts shouldn’t come as too much of a surprise. However, what the market will be more interested in is if they extend these cuts into early 2024,” Warren Patterson and Ewa Manthey, commodity strategists at ING, said in a note.

“Our oil balance shows that the market will be in surplus in 1Q24, which may be enough to convince the Saudis and Russians to continue with cuts through the seasonally weaker demand period of Q1,” they wrote.

WTI declined 5.9% last week, while Brent fell 4.8% — the second straight weekly decline for both grades as fears over a widening of the Israel-Hamas war appeared to fade.

Crude had rallied following the start of the war on fears that a wider conflict could see the U.S. more heavily enforce sanctions on Iranian crude exports, while a worst-case scenario could see Iran or its proxies threaten key transportation chokepoints and infrastructure in the region.