Oil rallies as trader weigh latest OPEC+ gambit
afr.comOil rose as traders weighed Saudi Arabian and Russian production cuts after a slew of low-volume trading sessions.
West Texas Intermediate rallied almost 3 per cent as tradingperked up Wednesday from sleepy holiday sessions. The two OPEC+ linchpins announced their latest batch of curbs on Monday, with a supply-cut extension by Riyadh and a fresh pledge to reduce production from Moscow.
“Speculative short covering has likely provided some support to prices, but fundamentally our gauge of supply risk is printing its highest levels year-to-date,” said Daniel Ghali, a commodity strategist at TD Securities. “Saudi Arabia’s decision to roll over its voluntary production cuts and Russia’s decision to curtail exports, as opposed to production, are the fundamental factors contributing to recent gains.”
The UAE won’t be joining voluntary oil cuts at this time, the country’s energy minister said. Saudi Energy Minister Prince Abdulaziz bin Salman said Russia’s latest oil cut is meaningful as it will affect exports.
Crude has slumped this year amid China’s stuttering economic recovery and after central banks in the US and Europe raised rates to quell inflation, jeopardising energy demand.
Still, key metrics are now strengthening. Brent’s prompt spread — the gap between the two nearest contracts — is back in a bullish, backwardated structure. The move is in line with traders repricing their expectations for near-term inventory draws on the horizon, added Ghali.
There have also been pockets of fundamental strength in recent days. Kazakhstan’s CPC crude has faced disruption as a result of power outages in the country. Separately, one refiner in Germany is limiting diesel supplies, a sign of regional supply tightness.
Bloomberg
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