Oil prices rise as Saudi Arabia and Russia continue to reduce their output

6 Nov 2023 , 10:04 AM

Monday saw a little increase in oil prices as major producers Saudi Arabia and Russia declared they will continue with more voluntary reductions in oil output through the end of the year, keeping supply limited while investors anticipated more stringent U.S. sanctions against Iranian oil.

U.S. West Texas Intermediate crude was up 54 cents, or 0.7%, to $81.05 per barrel, while Brent crude futures had increased 41 cents, or 0.5%, to $85.30 a barrel.

Saudi Arabia said it will proceed with its extra voluntary cut of 1 million barrels per day (bpd), which translates into a production of about 9 million bpd for December, in accordance with analysts’ predictions, a source at the ministry of energy told Reuters.

In response to the Saudi declaration, Moscow declared that it will carry out an extra voluntary reduction in supply of 300,000 barrels per day from its exports of crude oil and petroleum products through the end of December.

Last week, both contracts saw their second weekly decline, down roughly 6%, as a result of a declining geopolitical risk premium brought on by worries about supply disruptions brought on by a potential escalation of the Middle East conflict.

Sunday, as the senior U.S. diplomat hurried to manage a situation that threatened to worsen in neighbouring Lebanon, Israel rejected mounting international demand for a truce.

A plan to strengthen sanctions on Iranian oil was passed by the US House of Representatives on Friday. If it becomes law, it will impose restrictions on foreign ports and refineries that handle oil sent from Iran.

According to Baker Hughes’ weekly report released on Friday, the number of oil rigs in the US dropped to 496 last week, the lowest level since January 2022. Baker Hughes provides energy services.

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