Oil Prices Mixed Amidst Uncertainties
Oil prices diverge as uncertainties in the global market extend ahead of Yuletide. ICE Brent inched higher by 0.10% to $77.28 per barrel from the closing price of $77.20 a barrel in the previous trading session on Tuesday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $72.30 per barrel, down 0.02% from Tuesday’s close of $72.32 per barrel. Oil prices continued to trade flat today after settling at a 5-month low of US$77.2 per barrel yesterday.
Saudi Arabia reduced its official selling price for most of the buyers for January deliveries due to subdued oil demand and softer oil prices, ING commodities strategists said in a note.
For European buyers, Saudi Aramco lowered the official selling price for all the crude oil grades by US$2 for January deliveries. This follows a cut of around US$2.3 in December 2023.
Saudi’s benchmark Arab Light grade is available for European buyers at a premium of US$2.9 in Jan 2024 compared to a premium of US$7.2 for Nov 2023 deliveries.
For Asian buyers, the premium is set at US$3.5 for Jan deliveries, down by around US$0.5 compared to December prices. Premiums for the US buyers were also lowered by US$0.3 for all the grades.
Meanwhile, the American Petroleum Institute (API) reported that the US crude oil inventories increased by 0.6MMbbls over the last week, in contrast to the market expectations of a drawdown of around 2.3MMbbls.
Cushing crude oil stocks are reported to have increased by 4.3MMbbls.
On the products side, API reported that gasoline and distillates inventories also increased by 2.8MMbbls and 1.9MMbbls, respectively, over the week ending 1 December. The more widely followed EIA report will be released later today.
Both benchmarks have fluctuated widely so far this week as markets weigh the effectiveness of OPEC+ production cuts imposed during the group’s meeting last week.
After failing to agree on collective cuts, several members of OPEC+ announced their voluntary production cuts, amounting to 2.2 million barrels per day (bpd) for the first quarter of 2024.
Saudi Arabia contributed a cutback of 1 million bpd by extending its current cuts by three more months, and Russia agreed to two “export” cuts of 300,000 bpd of crude and 200,000 bpd of fuel oil. Nigeria Eurobond Slumps after CBN Resumes OMO Auction
Amid expectations of a supply build during the first quarter of 2024, the market reaction to the OPEC+ cuts was not as the group expected. Prices have not reached $80 per barrel, the group’s unofficial floor price, to keep the budget balanced.
Saudi Energy Minister Abdulaziz bin Salman assured that the previously agreed reductions of more than 2 million bpd would be completely implemented and said OPEC+’s oil output cutbacks may continue throughout the first quarter if needed.