Oil prices rose on Monday as top exporting countries Saudi Arabia and Russia said they would keep supplies tight by adhering to extra voluntary oil production cuts through the end of the year, and as investors focused on tougher U.S. sanctions on Iranian oil.
Brent crude futures were up 35 cents, or 0.41%, at $84.89 a barrel by 04:00 GMT. West Texas Intermediate (WTI) crude rose 41 cents, or 0.51%, at $80.92 a barrel.
Saudi Arabia has confirmed it will continue with an additional voluntary cut of 1 million barrels per day (bpd) in December to keep production at around 9 million barrels per day. The Saudi decision was in line with analysts’ expectations.
Russia also announced that it will maintain an additional voluntary supply cut of 300,000 barrels per day in exports of crude oil and petroleum products until the end of December.
Expectations that the market will run a surplus in the first quarter of next year probably persuaded the Saudis and Russians to continue the cuts.
Both Brent and WTI contracts fell for a second week last week as the geopolitical risk premium faded as US diplomats met with regional leaders to limit the risk that the Israel-Hamas war could lead to a wider conflict in the Middle East.
The market is not pricing in much geopolitical risk at current levels, but this remains a significant upside risk.
This week, investors are focused on more economic data from China after the world’s second-largest oil consumer released disappointing October factory data last week.
Oil prices are expected to be driven by Middle East headlines and technical charts this week.
Brent is expected to be supported at $80-85 per barrel due to the end of interest rate increases and the falling US dollar, based on ongoing supply disruptions following weaker-than-expected US employment data on Friday.
On Friday, the US House of Representatives passed a bill that would strengthen sanctions on Iranian oil and, if passed into law, would also impose measures on foreign ports and refineries that process oil exported from Iran.
Analysts are watching to see whether the potential law would affect Iran’s oil exports. Such sanctions often come with national security exemptions, and China may still import Iranian oil.
The number of oil rigs in the US fell by 8 last week to 496, the lowest level since January 2022, energy services company Baker Hughes said in its weekly report on Friday.