Crude oil prices steadied today after three consecutive losing sessions, mostly supported by a statement from Saudi Arabia that the production cuts agreed last week will be implemented in full.
Commenting on the OPEC+ decision, Energy Minister Abdulaziz bin Salman also said that the cuts would be extended beyond the first quarter of 2024 if necessary, Bloomberg reported.
Reuters noted in a report that oil prices have received some additional support from news about attacks on ships in the Red Sea, which is coming on the heels of the end of the ceasefire between Israel and Hamas.
This means that it's geopolitical factors that are supporting prices, rather than fundamentals, suggesting trader concern about global oil demand remains, applying downward pressure on prices.
This concern received a new dose of fuel this week when the U.S. Census Bureau reported that factory orders in October had fallen more than expected and recorded the biggest monthly drop since April 2020, per a Reuters report.
At the same time, there appears to be uncertainty about the implementation of the production cuts despite bin Salman's statement to Bloomberg.
There are "compliance doubts in the context of more fractious internal OPEC dynamics," according to Vishnu Varathan from Mizuho Bank, who spoke to Bloomberg.
Even so, ING said in its latest commodities outlook report that it expected OPEC+ policy to continue driving the oil market in 2024 and forecast a tight supply situation in the second half of the year.
The group continues to hold a large amount of supply from the market in order to support prices. We believe this will continue in 2024, but there are clear risks," head of commodity strategy Warren Patterson wrote, adding that one of OPEC+'s biggest causes for worry is the lack of universal agreement on the cuts within the group.
OPEC+ agreed to reduce total supply within the group by 2.2 million barrels daily over the first quarter of next year, with 1.3 of the total representing an extension to individual voluntary cuts by Saudi Arabia and Russia announced this summer.
Early on Tuesday morning, WTI had climbed to $73.65 and Brent was up at $78.66.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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