What’s happening: Crude oil closed higher on Thursday as Saudi Arabia stressed full compliance with output cuts.
What happened: Oversupply concerns seemed to be easing this week following a decline in US crude stockpiles and Hurricane Sally forcing offshore oil production and dozens of refineries to remain closed in the Gulf of Mexico region.
While making aggressive price cuts in a bid to gain market share, Saudi Arabia kept the pressure on OPEC+ members to remain compliant with production cuts.
Why it matters: The OPEC+ (Organization of the Petroleum Exporting Countries and its allies) held a meeting on Thursday to discuss their current output reduction commitments.
The group had pared output cuts to 7.7 million bpd (barrels per day) starting August, from record cuts of 9.7 million bpd. The group had warned members who were not complying with their quota limits to compensate for their increased production.
Saudi Arabia’s energy minister Prince Abdulaziz bin Salman, who is chairman of the JMMC (Joint Ministerial Monitoring Committee), stressed on the importance of full compliance with agreed production cuts.
The JMMC issued a recommendation to the OPEC to extend the compensation system (scheduled to expire in September) until December. Saudi Arabia’s energy minister later went on record to say that he had secured commitments from compliance laggards to compensate production cuts by the end of December.
A higher-than-expected decline in crude stockpiles also helped oil record gains yesterday.
WTI (West Texas Intermediate) crude for October delivery surged 2% to close at $40.97 per barrel on the NYMEX (New York Mercantile Exchange) on Thursday. US crude has surged more than 9% so far this week, rising above the $41 level.
November Brent crude jumped 2.6% to settle at $43.30 per barrel on ICE Futures Europe.
Domestic supplies of natural gas rose by 89 billion cubic feet in the week ending September 11, versus the consensus estimate of a rise of 77 billion cubic feet. October natural gas dipped 9.9% to settle at $2.042 per million British thermal units, following a 4% decline on Wednesday.
What to watch: The JMMC is scheduled to hold its monthly meeting on October 19, with the OPEC Conference and OPEC+ meeting set to take place on November 30 and December 1, respectively. Markets will keep an eye on news related to OPEC+ members complying with the production cuts, following another warning from the JMMC Chairman.
Investors also await Baker Hughes’s weekly report on crude oil rigs. Oil rigs in the US fell to 180 in the September 11 week, from 181 in the prior week.