Oil rises 1% after OPEC agrees to 1 million bpd supply cut; Brent reaches $84

Brent crude futures for January gained 91 cents, or 1.1 per cent, to $84.01 a barrel. The front-month Brent contract expires later on Thursday. The more liquid February contract was up 83 cents, or 1 per cent, at $83.71. US West Texas Intermediate crude futures rose by 81 cents, or about 1 per cent, to $78.67, according to news agency Reuters.

Also Read: India remains fastest-growing major economy, Q2 GDP growth beats RBI estimates: 5 key takeaways

Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, was last trading lower by 0.89 per cent at ₹6,430 per bbl, having swung between ₹6,409 and ₹6,644 per bbl during the session so far, against a previous close of ₹6,488 per barrel.

What’s driving crude oil prices?

-Saudi Arabia, Russia and other members of OPEC+, who pump more than 40 per cent of the world’s oil, held a virtual meeting on Thursday to discuss 2024 output amid concerns the market faces a potential surplus. The output of 43 million bpd already reflects cuts of about 5 million bpd aimed at supporting prices and stabilising the market.

-The latest agreement by OPEC+ would involve cuts approaching 2 million bpd including Saudi Arabia extending a voluntary cut of 1 million bpd it has had in place since July. Russia will cut 500,000 bpd and others will also contribute cuts, according to Reuters.

-The OPEC+ group surprised the market last week by delaying its November 26 to November 30 after the oil producers struggled to reach a consensus due to disagreement over output quotas by the African oil-producing countries.

-OPEC+ oil-producing countries meeting on Thursday to discuss 2024 output levels may convene again before the end of this year, Algeria’s Minister of Energy and Mines Mohamed Arkab told Reuters. Algeria has agreed to an addition cut of 50,000 barrels per day for January. However, investors will wait for a formal announcement from Thursday’s meeting and a breakdown of the additional cuts.

-The OPEC+ Joint Ministerial Monitoring Committee (JMMC) ended its meeting on Thursday without making a recommendation regarding 2024 output levels, according to Reuters. The committee met ahead of the wider meeting of ministers from the OPEC+ group of oil-producing nations.

Also Read: OPEC+ agrees to 1 million bpd oil output cut, extends Saudi Arabia’s voluntary reduction

Where are prices headed?

Crude oil extended gains ahead of the OPEC+ meetings on hopes members would agree on output cuts to stabilize global oil prices. Crude oil prices also recovered after a better than expected US third quarter GDP data. The US GDP grew 5.2 per cent in the third quarter against previous estimates of 4.9 per cent. 

However, an increase in the US crude oil inventories limited gains. As per official data, crude oil inventories build up of 1.6 million barrels in the last week was against expectations of a draw of 0.1 million barrels, said analysts.

‘’We expect crude oil prices to remain volatile this week amid volatility in the dollar index and OPEC+ meetings. Crude oil is having support at $76.85–76.10 and resistance is at $78.50-79.20. In INR crude oil has support at ₹6,390-6,320 while resistance is at ₹6,580-6,640,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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Updated: 30 Nov 2023, 09:47 PM IST