Oil nudges higher after Saudi Arabia, Russia stick to output cuts
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Oil prices edged up on Monday after top exporters Saudi Arabia and Russia said they would stick to extra voluntary oil output cuts until the end of the year, keeping supply tight, while investors watched out for tougher U.S. sanctions on Iranian oil.
Brent crude futures rose 41 cents, or 0.5%, to $85.30 a barrel by 0000 GMT while U.S. West Texas Intermediate crude was at $81.05 a barrel, up 54 cents, or 0.7%.
In line with analysts' expectations, Saudi Arabia confirmed it would continue with its additional voluntary cut of 1 million barrels per day (bpd) translating into a production of around 9 million bpd for December, a source at the ministry of energy said in a statement.
Following the Saudi statement, Moscow also announced it would continue its additional voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.
Both contracts notched their second weekly fall last week, down about 6%, driven by easing geopolitical risk premium that arose from concerns of supply disruptions due to a possible widening conflict in the Middle East.
On Sunday, Israel rebuffed growing international pressure for a ceasefire as the top U.S. diplomat scrambled to contain a crisis that threatened to further escalation in neighbouring Lebanon.
"The risk premium associated with the geopolitical backdrop has completely vanished after two weeks of volatile prices," ANZ analysts said in a note.
"The market's focus has turned to the demand outlook, which remains uncertain."
This week, investors are eyeing more economic data from China after the world's No. 2 oil consumer released disappointing October factory data last week.
Sydney-based IG analyst Tony Sycamore expects oil prices to be driven by headlines from the Middle East and technical charts this week.
He added that WTI needs to hold above support at $80 a barrel in the early part of this week, otherwise prices could drop to the $77.59 low seen in August.
On Friday, the U.S. House of Representatives passed a bill to bolster sanctions on Iranian oil that would impose measures on foreign ports and refineries that process petroleum exported from Iran if it is signed into law.
In the United States, oil rigs fell 8 to 496 last week, their lowest since January 2022, energy services firm Baker Hughes said in its weekly report on Friday.
