In a surprising turnaround, crude oil futures experienced a rebound on Tuesday, fueled by indications that Russia is staying true to its commitment of export cuts, while production constraints in Libya contribute to a surge in prices.
The West Texas Intermediate (WTI) crude oil futures (CL=F) experienced a notable uptick, rising by up to 1.5% during the trading session. Simultaneously, Brent crude oil futures (BZ=F) also witnessed an increase, partially recovering from the substantial losses incurred in the preceding session.
Ongoing protests in Libya have led to the withholding of approximately 300,000 barrels per day from the market, a consequence of the shutdown of a significant oil field last week.
Recent data tracked by Bloomberg on Russia’s crude oil exports indicates that the OPEC+ member has kicked off the year in adherence to the promised cuts. This positive development has heightened speculation that Saudi Arabia, the leader of the oil consortium, may extend its own cuts of 1 million barrels per day into the first quarter of this year.
Dennis Kissler, Senior Vice President at BOK Financial, commented on the evolving situation, stating, “The possibility of Saudi Arabia extending its cuts, combined with the rise in Indian fuel demand and China’s expanding refinery capacity, is effectively mitigating most of the losses incurred in yesterday’s trading session.”
Monday witnessed a sharp decline in both WTI and Brent crude oil prices, plummeting by more than 3%. This drop followed Saudi Aramco’s decision to reduce crude prices to Asia to their lowest levels since late 2021, sparking concerns about demand.
Compounding the market’s volatility are last week’s inventory builds in both gasoline and distillate fuels, primarily diesel. These builds have exerted additional downward pressure on crude oil markets.
Despite OPEC+’s assurances of adhering to deeper production cuts announced in late November, skepticism lingers within the market. Angola’s decision to exit the group over production disputes shortly after the cartel’s final 2023 meeting has only fueled concerns.
Analysts have pointed to increased oil production from the United States and other countries as a factor that will augment supply in the markets this year, potentially offsetting the impact of OPEC’s cuts. Bank of America analysts, in response to evolving market dynamics, recently revised their 2024 forecasts, lowering the price per barrel to $80 from the initial projection of $90. The rationale behind this adjustment, as explained by the analysts, is the “rising non-OPEC+ supply and fractures within OPEC+ that have softened fundamentals.”
In conclusion, the recent positive developments, including Russia’s adherence to export cuts and production challenges in Libya, have fueled a notable rebound in crude futures, injecting a renewed sense of optimism into the volatile global oil market.
Source: Yahoo Finance
