Crude oil bounced back on early Monday following a World Bank advisory and continued restrictions by Saudi Arabia and Russia.
The US West Texas Intermediate (WTI) petroleum December futures opened with a 0.61% gain to $81.00 per barrel (bbl) on November 06. Similarly, Brent black gold futures for January delivery rose by 0.47% to $85.29 bbl.
Analysts expect WTI and Brent oil to advance as high as $81.20 bbl and $85.55 bbl, respectively. Primary support came from self-imposed output reductions by two of the world’s top petroleum exporters.
Saudi Arabia announced to continue lowering its production by 1.00 million barrels per day (bpd). The move will slash the country’s production to around 9.00 million bpd.
Riyadh justified the decision as a part of preventive measures by the Organization of the Petroleum Exporting Countries and allies (OPEC+) to balance and stabilize the oil markets. Russia, a long-time Saudi ally, followed with its promise to lessen its yield by 300,000.00 bpd.
The two countries said they will review the voluntary cuts in early December with all options open. However, they also reiterated that the reductions will likely continue until the end of 2024.
OPEC+ countries began cutting output early last year. Historically, crude oil hit a 2023 high of $98.00 bpd in September and a low of $85.00 bpd last Friday.
World Bank Cautions Oil May Reach Record Prices
Last week, the World Bank warned that oil could soar to $150.00 bpd if the Israel-Hamas conflict becomes a full-scale war. According to the institution, historical data showed that fear always triggers a surge in the price of the most traded commodity.
Volatility is one of the most notable qualities of the petroleum market due to the commodity’s scarcity and necessity. Despite harsh price fluctuations, businesses will find it extremely difficult to pivot to other energy sources.
Oil’s inflexibility means that business owners can’t help but worry whenever they perceive a threat to supply. Furthermore, the commodity’s scarcity makes it hard for companies to secure a significant amount of it in advance.
As a result, stakeholders lock in prices through the futures market. Still, the oil futures market may fall into turmoil if the Israel-Hamas escalates and impacts nearby oil-producing countries.
As the Gaza conflict continues and fear builds up, the demand and price of crude may exponentially increase.
