Oil benchmarks headed for a seventh consecutive weekly decline on concerns about a global oversupply and weak Chinese demand. However, prices recovered after Saudi Arabia and Russia called on more OPEC+ members to join production cuts.
Brent crude futures were up $1.54, or 2.1%, to $75.59 a barrel by 07:04 GMT, while West Texas Intermediate crude futures (WTI) were up $1.39, or 2%, to $70.73 a barrel.
Both indicators fell to their lowest levels since late June in the previous session, a sign of oversupply in the market. Both benchmarks Brent and WTI are in contango, a market structure where front-month prices trade at a discount to prices further out.
Some short sellers closed their positions because the oil market was oversold. Meanwhile, falling oil prices are urging OPEC+ to leverage solidarity to improve the market.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, decided to cut production by a total of 2.2 million barrels per day (bpd) in the first quarter of next year.
Saudi Arabia and Russia, the world’s two biggest oil exporters, called on all OPEC+ members on Thursday to reach an agreement on production cuts for the good of the global economy, just days after a tense meeting with the producer group.
Despite the commitments of OPEC+ members, the total production of OPEC+ countries dropped by only 350,000 barrels from December 2023 to January 2024, from 38.23 million barrels per day to 37.92 million barrels per day.
By the way, it is possible that some OPEC+ countries may not comply with their commitments due to unclear quota bases and dependence on hydrocarbon revenues.
Both benchmarks, Brent and WTI crude oil futures, are on track for their biggest losses in five weeks, falling 4.2% and 4.5% respectively this week.
Concerns about the Chinese economy and the increase in US oil production also fueled the market to decline this week.
Chinese customs data showed crude oil imports fell 9% in November from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.
U.S. production remained near record levels at more than 13 million barrels per day, U.S. Energy Information Administration data showed Wednesday.
In India, the world’s third-largest oil consumer, fuel consumption decreased in November as holiday enthusiasm faded and travel decreased.
The market is also looking for clues on monetary policy from the official US monthly employment report to be released today. The data is expected to show job growth picking up in November and wages rising modestly. If the expectation comes true, the views that the US Federal Reserve has finished increasing interest rates in this cycle will strengthen.
