In a move that has contributed to tightening supply, Russia and Saudi Arabia, two of the world’s largest oil exporters, have announced that they will continue their voluntary production cuts until the end of the year. This decision has caused a boost in Brent crude and West Texas Intermediate (WTI) prices, which had previously experienced two consecutive weeks of decline.
Extension of Cuts Boosts Prices
Brent crude futures, the international benchmark, saw a 1.4% increase to $86.11, while WTI futures climbed 1.6% to $81.80.
In a statement released on Sunday, Saudi Arabia confirmed that it will maintain its additional cut of 1 million barrels per day through the following month, thus reiterating an announcement made in September. Furthermore, Russia affirmed its commitment to keeping its additional cut of 300,000 barrels per day in place until the end of December.
Reviewing the Cuts
Deputy Prime Minister Alexander Novak stated that the cuts will be reviewed next month to evaluate the possibility of deepening the cut or increasing production.
While these announcements have positively impacted oil prices, it’s important to note that Brent crude is still significantly below its September settlement high of approximately $96.55 a barrel. The recent Israel-Hamas conflict has somewhat contributed to its slight uplift.
The future trajectory of oil prices may largely depend on whether Saudi Arabia and Russia decide to extend their production cuts into the early part of 2024.