(News Bulletin 247) – Black gold prices took off after Riyadh announced the extension of its production cut for another three months. Russia will continue to reduce its exports until the end of 2023.

Oil is an asset class that has disappointed this year, due to fears about demand, particularly from China. But an upward movement has been emerging for several weeks. And the announcements from Russia and Saudi Arabia on Tuesday even allow black gold to hit highs of almost a year.

The North Sea Brent contract for delivery in November sold 1.6% shortly before 4 p.m. at 90.41 dollars a barrel. Brent had not exceeded the 90 dollar mark since November 2022. The October contract on WTI listed in New York advanced 2% to 87.22 dollars a barrel, again reaching its highest level since november.

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Keep production low

According to AFP, Saudi Arabia has announced that it will continue to reduce its oil production by one million barrels a day “for three additional months”, from October to December next. For its part, Moscow has indicated that it will continue to reduce its oil exports by 300,000 barrels a day until the end of 2023.

Oil contract prices were down slightly before these announcements.

“Oil prices have recovered, because operators have understood that OPEC + (the Organization of Petroleum Exporting Countries to which are added allied countries, such as Russia, editor’s note) was not willing to reduce supply tensions anytime soon,” commented Naeem Aslam of Zaye Capital.

“The fact that Saudi Arabia has extended its voluntary cut shows that OPEC+ members are quite willing to ‘keep production’ low for an extended period of time and are not interested in concerns of central banks,” he continues.

“Also, Saudi Arabia wants to keep prices higher, as it has massive spending in terms of committing to its infrastructure projects, which will change the country forever,” Naeem Aslam adds.

According to the US Department of Energy, Saudi Arabia and Russia were the second and third largest oil producers in the world in 2022, accounting for a quarter of global production.