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In a significant market development, oil prices fell by more than $1 on Wednesday, as both Saudi Arabia and Russia reaffirmed their commitment to prolong crude output cuts until the end of 2023. Brent crude oil futures dropped $1.58, or 1.74%, to $89.34 a barrel, while U.S. West Texas Intermediate crude (WTI) saw a decline of $1.60, or 1.79%, to $87.63 per barrel.
Saudi Arabia Commits to Year-End Cuts
The continued pressure on oil prices can be attributed to persistent concerns about demand due to ongoing macroeconomic headwinds.
Market attention has shifted away from short-term supply tightness and has instead focused on the implications of prolonged higher interest rates. This subdued macroeconomic environment poses challenges that OPEC+ must address in its upcoming meeting on November 26th, according to Investec analyst Callum Macpherson.
Read More: Oil Prices Fall as OPEC+ Panel Convenes
OPEC+ Meeting to Determine Future Course
The OPEC+ Joint Ministerial Monitoring Committee (JMMC) convened online on Wednesday, with expectations that the group would maintain its current oil output levels.
Saudi Arabia’s energy ministry confirmed its commitment to a voluntary 1 million barrel per day (bpd) crude supply cut through the end of the year, while Russia announced its intention to extend its current 300,000 bpd crude export cuts until year-end. Russia also plans to review its voluntary 500,000 bpd output cut, initially implemented in April, later this November.
In a potential shift, Russia may soon ease its diesel export ban, as reported by Kommersant on Wednesday.
Strong US Dollar Adds to Investor Concerns
Furthermore, a robust U.S. dollar is weighing on investor sentiment, posing additional challenges to the oil market. A strong dollar makes oil relatively expensive for holders of other currencies, potentially dampening demand.
In other economic indicators, the latest Purchasing Managers’ Index (PMI) data for the euro zone showed a score of 47.2 in September, a slight improvement from August’s 46.7. A PMI score below 50 suggests economic contraction.
Disclaimer: Please note that this article serves solely for informational purposes. Thus, must not construe as financial advice. We advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
