Oil prices surged on Monday as top exporters Saudi Arabia and Russia reaffirmed their commitment to maintain extra voluntary oil supply cuts until the end of the year. Brent crude futures rose by $1.03, or 1.21%, reaching $85.92 per barrel by 0834 GMT, while U.S. West Texas Intermediate crude stood at $81.58 a barrel, up by $1.07, or 1.33%.
This increase followed a week of losses, where both Brent and WTI futures had each dropped around 6% by November 3. Saudi Arabia confirmed its decision to continue its additional voluntary cut of 1 million barrels per day (bpd) in December, keeping its output at approximately 9 million bpd, as stated by a source at the ministry of energy, according to Reuters.
Similarly, Russia announced it would extend its voluntary supply cut of 300,000 bpd from its crude oil and petroleum product exports until the end of December.
Analysts from ING noted that the oil market is expected to be in surplus in the first quarter of the next year, potentially influencing the decision by Saudi Arabia and Russia to persist with the cuts. However, gains in oil prices might have been restrained due to a reduction in crude oil throughputs at Chinese refineries.
Refinery runs have been easing from the record levels experienced in the third quarter due to diminishing profit margins and a scarcity of export quotas until the end of the year, according to sources cited by Reuters. PVM analyst Tamas Varga suggested that the reaction to the Saudi and Russian decision was somewhat mitigated by the anticipated decrease in China’s refinery throughput for the current month.