By Ken Afor
Tuesday saw little variation in oil prices amidst the OPEC+ immunized output reductions, Middle Eastern unease, and underwhelming data from the American economy.
By 0402 GMT, Brent crude futures had decreased by 1 cent to $78.02 per barrel, whereas U.S. West Texas Intermediate (WTI) crude futures increased by 5 cents to $73.09 per barrel.
Kelvin Wong, senior market analyst for Asia pacific at OANDA, mentioned that the statement by Saudi Arabia’s energy minister, concerning the potential OPEC+ output reductions remaining until the beginning of 2024 if needed, provided some stability to the market.
CMC Markets analyst Tina Teng indicated that, in the previous trading session, oil prices had decreased as traders questioned if supply reductions by OPEC+ would be substantial and due to the reinforced U.S. dollar, which was exerting pressure on commodities in general.
Holders of other currencies may be discouraged from buying oil if the dollar becomes stronger as this will make it more expensive.
At their meeting on Thursday, OPEC+ – an intergovernmental group composed of the Organization of the Petroleum Exporting Countries (OPEC) and allied countries such as Russia – agreed to voluntary reductions in production of an estimated 2.2 million barrels per day for the first quarter of 2024.
Saudi Arabia has taken the lead in this agreement by continuing with its existing voluntary production cut.
At least 1.3 million barrels per day (bpd) of those cuts are an extension of the voluntary curbs that Saudi Arabia and Russia have already set.
Concerns about the supply rose due to the renewal of the Israel-Hamas war, as well as the attacks on three commercial ships navigating the southern Red Sea.
Since October 7, when the war between Israel and Palestinian militant group Hamas commenced, there have been a number of attacks in Middle-Eastern waters which followed those incidents.
On Tuesday, data showed that U.S. factory orders decreased more than expected in October, the most it has done in over three years, leading to a more pessimistic outlook in the oil market.
Analysts contended that this development corroborated the idea that rising interest rates were causing a decrease in consumer spending.
