Oil futures settled Tuesday at their highest since November, shaking off an early decline, as prices found support in the wake of decisions by Saudi Arabia and Russia to extend their voluntary production cuts through the end of this year.
Prices for the commodity had been trading lower in early dealings, pressured after downbeat economic data from China raised worries about global demand.
Price action
-
West Texas Intermediate crude
CL00,
-0.35% for October delivery CL.1,-0.35% CLV23,-0.35% rose $1.14, or 1.3%, to settle at $86.69 a barrel on the New York Mercantile Exchange, with front-month prices settling at their highest since Nov. 15, according to Dow Jones Market Data. WTI, the U.S. benchmark, didn’t close Monday due to the Labor Day holiday. -
November Brent crude
BRN00,
-0.19% BRNX23,-0.19% , the global benchmark, added $1.04, or 1.2%, to settle at $90.04 a barrel on ICE Futures Europe, the highest since Nov. 16. -
October gasoline
RBV23,
+0.95% lost 0.4% to $2.58 a gallon, while October heating oil HOV23,+0.90% climbed 3.7% to $3.22 a gallon. -
Natural gas for October delivery
NGV23,
+1.09% settled at $2.58 per million British thermal units, down 6.6%.
Market drivers
Saudi Arabia will extend a production cut of 1 million barrels a day for three months, running to the end of December, the country’s official press agency reported Tuesday, citing an energy ministry official.
The report said Saudi production in October, November and December would effectively be 9 million barrels a day.
Separately, Russia’s Deputy Prime Minister Alexander Novak announced that his country will extend its additional voluntary cut in oil supplies to world markets by 300,000 barrel a day until the end of December.
Read: Oil trades at 2023 highs. Are U.S. prices headed for $100?
“Oil prices have rallied as traders have gotten the message loud and clear that OPEC+ is not in the mood to ease supply anytime soon,” Naeem Aslam, chief investment officer at Zaye Capital Markets, in emailed commentary.
WTI jumped more than 7% last week, while Brent advanced 5.5%, with both benchmarks ending Friday at their highest since November. Brent added to its rise in London trading on Monday.
Crude prices more than recovered from an early August swoon as the market focus turned back to tightening supplies, enhanced by expectations Saudi Arabia would extend its production cut through October.
Early Tuesday, oil prices had seen some pressure after downbeat news from the world’s second-largest economy.
A Caixin survey showed China’s service sector expanded in August at its slowest pace in eight months, providing further evidence that the country’s postpandemic recovery was faltering.
In addition, a eurozone survey showed that output in the bloc contracted at its fastest pace in nearly three years last month.
Analysts said the backdrop for crude remains constructive, however. Futures for Brent and WTI have moved into backwardation, meaning that front-dated contracts are priced higher than deferred contracts, underlining tightness in the physical market for crude.
Meanwhile, natural-gas futures dropped by nearly 7% Tuesday, the largest daily percentage drop since Aug. 10, on expectations for lower demand.
Short-term temperature outlooks shifted significantly cooler over the holiday weekend, said Victoria Dircksen, commodity analyst at Schneider Electric, in a daily note. That would ease cooling demand for natural gas.
Temperatures in the Central and Midwest regions of the lower 48 are expected to see below-average to near-normal temperatures through September 14th, she said, citing the National Oceanic and Atmospheric Administration’s six- to 10-day temperature outlook.
