Oil ticks higher from 5-month low after Russia hints at deepening OPEC+ cuts
Oil prices ticked higher after falling to five-month lows on Tuesday, December 5, after Russia said that the Organisation of Petroleum Exporting Countries and its allies (OPEC+) was ready to deepen output cuts in the first quarter of next year. Russian Deputy Prime Minister Alexander Novak said that OPEC+ could take additional steps to eliminate ‘speculation and volatility’ if existing actions to cut production were not enough.
Brent crude futures rose by 71 cents, or 0.9 per cent, to $78.74 a barrel. US West Texas Intermediate crude futures climbed 69 cents, or 0.9 per cent, to $73.73, according to news agency Reuters. Oil prices had fallen on Monday on doubts that existing OPEC+ cuts would have a significant impact.
Also Read: Putin to visit Saudi, UAE on December 6 after OPEC+ cuts, host Iran President: What’s on agenda?
Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a December 18 expiry, was last trading lower by 0.13 per cent at ₹6,149 per bbl, having swung between ₹6,044 and ₹6,193 per bbl during the session so far, against a previous close of ₹6,157 per barrel.
What’s driving crude oil prices?
-OPEC+ agreed on Thursday to output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024. At least 1.3 million bpd of those cuts were an extension of voluntary curbs Saudi Arabia and Russia already had in place.
-The additional cuts announced on Thursday were below the 1 million bpd reduction that the market expected, and OPEC+ was only likely to deliver cuts in practice closer to 500,000 bpd compared to the fourth quarter.
-Russian President Vladimir Putin will pay a working visit to the United Arab Emirates (UAE) and Saudi Arabia on Wednesday, December 6, a Kremlin spokesman said, and hold talks in Russia the next day with the president of Iran.
-Putin would discuss possible coordinated actions on global oil markets during his Gulf trip and talks held within OPEC+ will be on agenda. Apart from energy issues, Putin is keen to cultivate the Gulf states as part of his drive to build global alliances with non-Western countries.
-Elsewhere, the resumption of fighting in the Israel-Hamas war and attacks on three commercial vessels in the southern Red Sea stoked supply concerns and helped prop up oil prices, according to Reuters.
-Prospects for higher demand were also lifted after European Central Bank board member Isabel Schnabel told Reuters the bank can take further interest rate hikes off the table following a ‘remarkable’ fall in inflation.
Where are prices headed?
Crude oil exhibited pronounced volatility and the downturn was attributed to a resurgence in the dollar index and growing uncertainty surrounding the OPEC+ production cut. The dollar index rebounded from 14-week lows following hawkish comments from the Fed Chairman.
Furthermore, crude oil prices faced downward pressure due to disappointing output cuts from OPEC+ nations. Despite these factors, geopolitical tensions in the Middle East and a decrease in inflation within the Euro-zone may lend some support to oil prices at these lower levels, according to analysts.
‘’Anticipating ongoing fluctuations, we project crude oil prices to remain volatile in today’s session. The support for crude oil stands at $72.65–72.10, with resistance observed at $74.00-74.80. In terms of Indian Rupees (INR), crude oil finds support at ₹6,070-6,000, while resistance is seen at ₹6,220-6,290,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Updated: 05 Dec 2023, 09:39 PM IST
