By Ken Afor
Benchmarks for oil were on their way to a seventh consecutive week of decrease due to anxieties concerning an international supply abundance and weak Chinese demand.
However, costs recovered on Friday after Saudi Arabia and Russia asked for other OPEC+ members to take part in production cuts.
At 03:59 GMT, Brent crude futures increased to $75.34 a barrel, a rise of $1.29 or 1.7%, while U.S. West Texas Intermediate (WTI) crude futures rose to $70.45 a barrel, representing a gain of $1.11 or 1.6%.
In the prior session, both Brent and WTI benchmarks decreased to their lowest since the end of June, which indicates that many traders believe the market has an abundant supply.
Furthermore, Brent and WTI are both in contango, a situation where the front-month prices are trading at a lower price compared to longer-term prices.
“Some short sellers closed their positions as the oil market was seen oversold. Meanwhile, the plunging oil prices forced OPEC+ to improve solidarity to calm the market,” said analysts from Haitong Futures in a note.
On Thursday, Saudi Arabia and Russia, the world’s biggest oil exporters, urged all OPEC+ members to join in an accord on production reductions for the benefit of the global economy, just a few days after a highly contentious gathering of the OPEC club.
OPEC+ – a coalition of the Organization of the Petroleum Exporting Countries and its allies – has decided to cut back its combined production of 2.2 million barrels per day in the first three months of 2021.
“Despite OPEC+ members’ pledges, we see total production from OPEC+ countries dropping by only 350,000 bpd from December 2023 into January 2024 (38.23 million bpd to 37.92 million bpd),” said Viktor Katona, lead crude analyst at Kpler.
Katona stated that some members of OPEC+ may not stick to their duties due to foggy allowance lines and reliance on hydrocarbon earnings.
Brent and WTI crude futures are set to report their most substantial slides in five weeks, declining by 4.5% and 4.8%, respectively.
Worsening economic conditions in China and a heightened U.S. oil output have further deteriorated the market in recent days.
In November, Chinese imports of crude oil decreased by 9% from the same month in the previous year, owing to bloated inventories, feeble economic signs, and declining orders from independent refineries that dampened the demand.
In India, fuel consumption dropped in November after reaching a four-month high in October, due to decreased travel as the anticipated festive surge did not materialize in the world’s third-largest oil consumer.
Output in the United States stayed close to its highest-ever level of more than 13 million barrels per day (bpd), according to the U.S. Energy Information Administration on Wednesday.
