After seven consecutive sessions of decline, oil prices finally saw an increase on Friday, thanks in part to verbal support from Russia and Saudi Arabia. Despite the recent uptick, prices were still on track to record a seventh straight weekly loss.
Price Action
- West Texas Intermediate (WTI) crude for January delivery rose $1, or 1.4%, to $70.34 a barrel. This followed a 0.1% decrease and a settlement at $69.34 a barrel on the New York Mercantile Exchange the previous day.
- February Brent crude, the global benchmark, saw a rise of $1.14, or 2.6%, reaching $75.93 a barrel. It had closed down 0.3% at $74.05. Both WTI and Brent crude experienced a six-session decline, marking the longest losing streak for both since February.
While there have been declines in oil prices, January gasoline and heating oil have experienced gains:
- January gasoline rose 2.3% to $2.046 a gallon.
- January heating oil gained 2% to $2.59 a gallon.
Natural gas for January delivery also saw a slight increase of 0.2% to $2.59 per million British thermal units.
Market Drivers
Oil prices have faced additional pressure following the Nov. 30 OPEC+ meeting. The meeting offered more voluntary cuts for the first quarter of 2024 but left traders concerned about whether all countries would adhere to these measures.
During the meeting, OPEC+ producers agreed to cut around 2.2 million barrels a day (mbd) of crude from the market in the first quarter of next year. This included an anticipated extension of Saudi Arabia’s 1 mbd voluntary output cut and Russia’s 300,000 barrel a day cut to crude exports.
Some experts credit the recent price increase to the verbal support from Russia and Saudi Arabia. Stephen Innes, managing partner at SPI Asset Management, noted in a client memo that this bounce in prices came after a meeting between Russian leader Vladimir Putin and Saudi Crown Prince Mohammed bin Salman. The leaders emphasized their ongoing efforts to stabilize global oil markets and manage production levels.
The Importance of Cooperation in Enhancing Oil Market Stability
The recent visit of Putin to Riyadh with the Saudi Crown Prince resulted in the release of a joint statement, emphasizing the significance of cooperation between the two sides. Specifically, they commended the close collaboration and successful efforts of OPEC+ countries in enhancing the stability of global oil markets.
Continued cooperation and adherence to the OPEC+ agreement were highlighted as crucial factors in serving the interests of both producers and consumers, while also supporting the growth of the global economy.
Decline in Oil Prices Raises Concerns
WTI and Brent are currently experiencing their seventh consecutive week of losses, with each seeing a decline of around 6%. Such a continuous decrease has not been witnessed since 2018, based on FactSet data.
Ole Hansen, head of commodity strategy at Saxo Bank, notes that while crude oil prices have steadied around $75 per barrel, they remain at risk of further decline. The doubts surrounding the adherence of certain OPEC+ producers to their promised cuts, alongside ample global supply, contribute to this uncertainty. If prices drop further towards $70 per barrel, it may necessitate an emergency OPEC+ meeting.
Concerns Over China’s Crude Oil Imports
Crude oil imports from China witnessed a significant decline of 10% in November, as reported by S&P Global Commodity Insights. This decline raises concerns about China’s demand for oil, which has implications for the global market.
Monitoring Market Developments in Venezuela-Guyana Border Dispute
Furthermore, oil traders are closely monitoring developments relating to the approval of a referendum in Venezuela. This referendum aims to claim sovereignty over an oil-rich piece of land from Guyana. Any outcome in this border dispute has the potential to impact oil prices, adding another element of uncertainty to the market.
