Global benchmark Brent crude oil rose above $78 a barrel, after Russia said OPEC+ was ready to deepen output cuts in the first quarter of next year. Brent crude futures rose by 71 cents, or 0.9%, to $78.74 a barrel while U.S. West Texas Intermediate crude futures climbed 69 cents, or 0.9%, to $73.73. Russian Deputy Prime Minister Alexander Novak was reported on Tuesday as saying OPEC+, which groups the Organisation of the Petroleum Exporting Countries and allies such as Russia, could take additional steps to eliminate “speculation and volatility” if existing actions to cut production were not enough. Oil prices had fallen on Monday on doubts that existing OPEC+ cuts would have a significant impact, said CMC Markets analyst Tina Teng.
OPEC+ agreed on Thursday to output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024. But 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, FGE analysts wrote, adding that OPEC+ was only likely to deliver cuts in practice closer to 500,000 bpd compared to the fourth quarter. 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. 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.
However, U.S. data on Tuesday showed factory orders fell by more than analysts expected in October and by the most in more than three years, raising concerns about U.S. demand. Analysts said the data suggested higher interest rates were curbing spending. Investors are waiting for a slew of data, including a U.S. jobs report later on Tuesday, to gauge whether the Federal Reserve will cut interest rates by early next year.
