Oil prices recovered on Wednesday as Opec and its allies prepared to meet in Abu Dhabi to discuss their compliance with the pact to cut production to balance the markets.
Brent, the European benchmark for light, sweet crude was trading at $62.97 per barrel at 3.30pm UAE time on Wednesday, recovering from closing in the negative the day before as markets reacted to the dismissal of the hawkish John Bolton as the US National Security Adviser. US West Texas Intermediate oil was trading at $58.07 per barrel.
The news ended five days of consecutive wins for oil markets, which were bolstered by indications from the new Saudi energy minister that the Opec+ pact will hold and the kingdom was not intending to revise its current policy.
Mr Bolton had pushed for a more aggressive position on Iran, which the US administration has accused of masterminding a spate of attacks on tankers transiting the Strait of Hormuz. An open advocate of military action against the Iranian regime, he was behind the administration’s “maximum pressure” approach to Tehran, which included squeezing the country’s exports to zero.
With Mr Bolton’s departure, some of the geopolitical risks associated with a full-blown conflict may have faded, but there is unlikely to be a change in US policy towards Iran.
"Any replacement might be less outspoken on military options, but the White House overall is unlikely to change its foreign policy considerations much,” JBC Energy said in a note.
"For Iran, this may just again underpin our base-case assumption of a continuation of the protracted status quo, with only pretty slim options for some type of 'deal',” the note added.
Meanwhile, Opec+, which has been cutting back 1.2 million barrels per day of output since January, is set to review numbers in Abu Dhabi before recommending revisions to the existing pact, if needed, on Thursday. Iraq and Nigeria, who have both exceeded their production quotas, have pledged to cut back their output at this meeting.
Opec secretary-general Mohammed Barkindo told reporters late on Tuesday that Nigeria’s new oil minister Timipre Silva has pledged discipline.
"We had a very good meeting with him yesterday and he’s hitting the ground running. He’s already taking appropriate measures on how to ensure that Nigeria remains fully and timely compliant. He’s very committed to the declaration of co-operation,” Mr Barkindo told reporters.
The Declaration of Co-operation refers to the pact between Opec members and oil-producing non-members led by Russia to undertake supply corrections, which has been in place since 2016.
Iraq, Opec’s second-biggest producer, has also vowed to commit to cuts even as it nears 5 million bpd production capacity.
"We are trying to adhere to commitment to the Opec agreement but with difficulties, of course. Presently we are trying to keep production levels to what we agreed on,” Iraqi oil minister Thamir Ghadhban, who also serves as the country’s deputy prime minister, said on Tuesday.
