Oil prices edge higher after Opec+ sticks to output cuts

The producers' group said it would 'closely assess' market conditions and is ready to take additional measures

Unused oil rigs sit in the Gulf of Mexico near Port Fourchon, Louisiana. Reuters
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Oil prices edged higher on Thursday after the Opec+ alliance of crude producers stuck to existing output cuts at its latest meeting.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.77 per cent higher at $86.45 a barrel at 9.07am UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.61 per cent at $84.73 a barrel.

Both benchmarks have gained some of the lost ground after sharp declines in the previous trading session. On Wednesday, Brent settled 5.62 per cent lower at $85.81 a barrel. WTI closed down 5.61 per cent at $84.22.

“For $100 [per barrel] oil to happen, we need to see a fresh catalyst. The current state of the oil market is that global economic pain is coming courtesy of surging bond yields,” said Edward Moya, senior market analyst at Oanda.

“Crude demand destruction will occur this quarter, but this pullback in prices will be limited given the risks of further shocks to supplies and a reacceleration of the US economy.”

Following its ministerial meeting on Wednesday, the 23-member Opec+ group said it would “closely assess” market conditions and stand ready to take additional measures at “any time”.

Saudi Arabia, the world's top oil exporter, confirmed it would continue with its voluntary production cut of 1 million barrels per day until the end of the year, with Russia keeping its export curb of 300,000 bpd in place until December-end.

Oil prices, which surged past the $95 mark last week, have undergone a sharp retraction as investors once again focus on macroeconomic headwinds.

Supply tightness in the market has also been eased by news of the potential reopening of a 500,000-bpd Iraqi-Turkey pipeline.

Iraq's northern oil export route through Turkey will begin operations “this week”, Turkey's Energy Minister said at the Adipec energy conference on Monday.

Opec+ is doing its “best” to maintain a healthy balance of supply and demand in the market, the Minister of Energy and Infrastructure, Suhail Al Mazrouei said this week.

Mr Al Mazrouei, who was speaking at Adipec in Abu Dhabi, said the group was monitoring improvements or declines in major export markets, particularly in China, the world's second-largest economy and top crude importer.

“Many dynamics are moving on and we hope that the growth in China picks up … because the whole world economy is dependent on China,” Mr Al Mazrouei said.

China's post-coronavirus economic recovery has lost momentum mainly due to a deepening property slump and weak consumer spending.

The Asian country recently announced a string of stimulus measures, including halving the stamp duty on stock transactions and easing mortgage rates.

Its oil demand in July grew by 2 million bpd for the third consecutive month, driven by higher demand for transport fuels and continuing recovery in air travel, Opec said in its September oil market report.

Updated: October 05, 2023, 5:53 AM