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LONDON: Oil benchmarks were headed for a seventh straight weekly decline on worries over a global supply surplus and weak Chinese demand, although prices recovered ground on Friday after Saudi Arabia and Russia called for more members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to join output cuts, according to Reuters.
Brent crude futures rose $1.29, or 1.7 percent, to $75.34 a barrel by 6:59 a.m. Saudi time, while US West Texas Intermediate crude futures gained $1.11, or 1.6 percent, to $70.45 a barrel.
Both benchmarks slid to their lowest since late June in the previous session, a sign that many traders believe the market is oversupplied. Brent and WTI are also in contango, a market structure in which front-month prices trade at a discount to prices further out.
“Some short sellers closed their position as the oil market was seen oversold. Meanwhile, the plunging oil prices forced OPEC+ to improve solidarity to calm the market,” said analysts from Haitong Futures in a note.
Saudi Arabia and Russia, the world’s two biggest oil exporters, on Thursday called for all OPEC+ members to join an agreement on output cuts for the good of the global economy, only days after a meeting of the producers’ club.
The organization agreed to a combined 2.2 million barrels per day in output cuts for the first quarter of next year.
“Despite OPEC+ members’ pledges, we see total production from OPEC+ countries dropping by only 350,000 bpd from December 2023 into January 2024 (38.23 million bpd to 37.92 million bpd),” said Viktor Katona, lead crude analyst at Kpler.
Some of the OPEC+ countries may not adhere to their commitments due to muddied quota baselines and dependence on hydrocarbon revenues, Katona said.
Brent and WTI crude futures are on track to fall 4.5 percent and 4.8 percent for the week, respectively, their biggest losses in five weeks.
Concerns about China’s economy and surging US oil output have also fueled the market’s downturn this week.
Chinese customs data showed its crude oil imports in November fell 9 percent from a year earlier as high inventory levels, weak economic indicators and slowing orders from independent refiners weakened demand.
In India, fuel consumption in November fell after touching a four-month peak the previous month, hit by reduced travel in the world’s third-biggest oil consumer as a festive boost fizzled.
In the US output remained near record highs of more than 13 million bpd, US Energy Information Administration data showed on Wednesday.