Saudi Arabia and Russia Affirmed their Commitment to OPEC+ Output Cut of 2 Million Barrels per Day

Oil prices settled lower on Friday, reversing earlier gains to post their biggest weekly declines in months amid turmoil in global financial markets stemming from fears of a banking crisis.
Brent, the benchmark for two thirds of the world’s oil, slid 2.32 per cent, or $1.73, to settle at $72.97 a barrel. West Texas Intermediate (WTI), the gauge that tracks US crude, lost 2.36 per cent, or $1.61, to close at $66.74 a barrel.
For the week, Brent declined 12 per cent, its worst weekly showing since December, while WTI shed 13 per cent, its lowest since April 2022. Both benchmarks dropped by more than $3 at one point.
Oil prices were trading up earlier on Friday on a potential OPEC+ response. Saudi Energy Minister Prince Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak met in Riyadh on Thursday and discussed global oil markets, as well as efforts by OPEC+ to promote “market balance and stability”, the Saudi Press Agency reported.
They also affirmed their commitment to the group’s decision to slash its output by 2 million barrels per day until the end of 2023.
Brent, which dropped to a 15-month low on Wednesday, has shed about 10 per cent of its value this week amid market uncertainty over Swiss Bank Credit Suisse and the collapse of California-based Silicon Valley Bank.
“Oil prices have crashed out of the trading range they had set for 2023, with Brent and WTI futures falling to their lowest levels since the end of 2021,” said Edward Bell, senior director of market economics at Emirates NBD.
“For most of the year, oil prices have been oscillating between support from China reopening trade and pressure from hawkish central banks and tighter monetary policy. This latest burst of financial anxiety adds another negative for prices in the near term.
“From a fundamental perspective, the volatility introduced by stress in financial markets doesn’t change anything for oil.”
Concerns about a global banking crisis eased, with Asian stocks opening higher on Friday after First Republic Bank, whose shares nearly halved this week, secured a $30 billion lifeline from a group of large US lenders, including Bank of America, Citigroup, JP Morgan Chase and Wells Fargo.
The shares of Credit Suisse surged as much as 40 per cent on Thursday after the bank opened a 50 billion Swiss franc ($54 billion) credit line with the country’s central bank.
Earlier, financial regulator Finma and the Swiss National Bank said Credit Suisse met the “capital and liquidity requirement imposed on systematically important banks”.
“Crude prices turned positive as risk appetite returned to Wall Street after reports of efforts to help the troubled banking stocks,” said Edward Moya, senior market analyst at Oanda.
“[But], monetary policy continues to get more restrictive as central banks continue to deliver more rate hikes.”
Despite the recent turmoil in the market, the European Central Bank raised interest rates by 0.5 per cent and said there was no need for its monetary policy plans to be adjusted because of the sharp movements in several European bank shares over the past week.
The ECB lifted its deposit rate to 3 per cent, the highest level since late-2008, with inflation expected to overshoot its 2 per cent target until at least 2025.
“We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area,” said ECB President Christine Lagarde.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said the US Federal Reserve could raise rates next week to tame stubborn inflation.
“The fact that the ECB has increased the rate by 50 basis points, the chances are now that the Fed is going to do the same, as well,” said Mr Aslam.
Although crude oil demand is expected to rise “sharply” this year on Chinese demand and a rebound in air travel, the market is currently in a surplus as Russian crude barrels are being rerouted to new destinations, the International Energy Agency said in a report this week.
“The market is caught in the cross-currents of supply outstripping still-lacklustre demand, with stocks building to levels not seen in 18 months,” the agency said.
Russian production remained at prewar levels but the country’s February crude exports fell by more than 500,000 bpd following the introduction of a G7 price cap and an EU embargo on refined oil products, the agency said.
On Tuesday, OPEC raised its forecast for Chinese oil demand growth on the relaxation of Covid-19 measures.
However, it stuck to its global demand estimate of 2.3 million bpd, citing a potential economic slowdown in Europe and the Americas.

About Parvin Faghfouri Azar

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