Oil falls over $2 on demand fears, Saudi confirms cuts to year-end
LONDON -Oil fell on Wednesday, as pledges by Saudi Arabia and Russia to continue crude output cuts to the end of 2023 were offset by demand fears stemming from macroeconomic headwinds.
Brent crude oil futures were down $2.02, or 2.22 percent, to $88.90 a barrel at 1228 GMT, while U.S. West Texas Intermediate crude (WTI) fell $2.10, or 2.35 percent, to $87.13 per barrel.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC) online meeting on Wednesday kept the group’s output policy unchanged, two sources said while the meeting was underway.
The JMMC will next meet on Nov. 26, a statement said.
Oil prices remain under pressure from demand fears driven by macroeconomic headwinds.
“Market attention has shifted from the focus on the short term tightness to the implications of interest rates staying higher for longer, the subdued macro environment that entails, and how OPEC+ plans to deal with that when it meets on 26th November,” said Investec analyst Callum Macpherson.
Saudi Arabia’s energy ministry confirmed on Wednesday it will continue its voluntary 1 million barrel per day (bpd) crude supply cut until the end of this year.
Russia said it will continue its current 300,000 bpd crude export cuts until the end of the year, and will review its voluntary 500,000 bpd output cut, set back in April, in November.
Russia may ease diesel ban
Russian Deputy Prime Minister Alexander Novak said joint voluntary cuts by Russia and Saudi Arabia have helped to balance oil markets.
Novak also welcomed the positive effect that the Kremlin’s diesel and gasoline export ban has had on the domestic market, adding that the government is continuing to monitor fuel prices in Russia.
Earlier on Wednesday daily Kommersant reported that Russia could be ready to ease its diesel ban in coming days, citing unidentified sources.
A strong U.S. dollar could also be weighing on investor sentiment.
The current dollar strength is “a rally that will continue to haunt all markets including oil, even when, as is now, there is a compelling fundamental backdrop,” PVM analyst John Evans said.
As the trade currency of oil, a strong dollar makes oil comparatively expensive for holders of other currencies, which can dampen demand.