OPEC+ holds firm on cuts, oil prices rebound

2 Feb 2024 , 11:54 AM

Following OPEC+’s decision to maintain its oil output policy, oil prices increased in early trading on Friday, recovering some of the losses from the previous trading session caused by unconfirmed rumours of an Israeli-Hamas ceasefire.

U.S. West Texas Intermediate crude futures increased by 40 cents, or 0.5%, to $74.22 a barrel, while Brent crude futures increased by 50 cents, or 0.6%, to $79.20 a barrel.

The unconfirmed ceasefire reports between Israel and Hamas caused both contracts to settle more than 2% down on Thursday. A Qatari spokesman asserted that there was no ceasefire, nevertheless. He said that a cease-fire proposal issued earlier this week had been warmly welcomed by Hamas.

Attacks on ships in the Red Sea by Yemen’s Houthi forces have exacerbated geopolitical tensions and raised concerns about shipping in the area. The coalition, which is allied with Iran, declared on Thursday that its armed forces had attacked an unnamed British trade ship in the Red Sea.

According to two OPEC+ sources on Thursday, the organisation has not altered its stance regarding oil output and will decide in March whether to continue the voluntary reductions in oil production that were implemented during the first quarter.

As announced in November, the Organisation of the Petroleum Exporting Countries (OPEC+) and its allies, led by Russia, have implemented output cuts of 2.2 million barrels per day (bpd) for the first quarter.

The U.S. Federal Reserve’s decision to maintain the benchmark overnight interest rate in the 5.25–5.50% range and Chair Jerome Powell’s remarks that interest rates had peaked and would decline in the upcoming months also helped to bolster oil prices.

Lower interest rates would lower the cost of borrowing for consumers, which would increase demand for oil and spur economic growth.

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