Oil prices settle at 10-month high as Saudi, Russia extend supply cuts

The crude oil price rallied yesterday and surpassed the significant levels of USD 90 per barrel. Brent crude futures increased by USD 1.04, equivalent to a 1.2% rise, finally concluded at USD 90.04 per barrel.

This closing price surpassed the USD 90 threshold for the first time since November 16, 2022. Meanwhile, US West Texas Intermediate crude (WTI) futures saw a gain of USD 1.14, or 1.3%, settling at USD 86.69 per barrel, marking a 10-month high.

The increase in prices came in response to an announcement indicating that Saudi Arabia and Russia had agreed to extend their oil production cuts for an additional three months, stretching until December.

Investors had anticipated that Saudi Arabia and Russia would extend their voluntary cuts until October, but the unexpected three-month extension caught them by surprise.

This move was more assertive than what market participants had anticipated from the two largest OPEC+ members, and it will maintain production at approximately 9 million barrels per day for half a year, marking the lowest level in years.

Additionally, Saudi Arabia will continue its voluntary reduction of 1 million barrels per day.

Both Saudi Arabia and Russia stated that they would assess the supply cuts monthly and might adjust them in response to market conditions.

The world’s largest share of oil reserves, accounting for 48% of known and identified reserves, is in the Middle East. Following this region, the distribution of reserves is as follows: North America, Africa, Central and South America, Eurasia, Asia and Oceania, and Europe.

OPEC, which has a significant influence on the global oil market, manages nearly 40% of the world’s crude oil production, possesses approximately 75% of the world’s confirmed oil reserves, and is responsible for exporting 55% of the internationally traded oil.

Crude oil is a naturally existing, unprocessed form of petroleum comprised of hydrocarbon deposits found in natural underground pools or reservoirs. It retains its liquid state under normal atmospheric pressure and temperature conditions.

It can be refined to produce usable products such as gasoline, diesel, and various forms of petrochemicals.

From a technical perspective, it has indeed established a strong support level at around USD 70 per barrel on the chart, receiving support nearly three times in the month of June and earlier in May this year. Moreover, it has experienced an approximate 28% surge from this level.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.