Oil Inches Higher on OPEC Supply Cut Expectations, Hits $88.58 Per Barrel

Emmanuel Addeh in Abuja

Oil prices edged higher yesterday supported by expectations that major producers will tighten supply, with Brent crude November futures up 3 cents at $88.58 a barrel, while US West Texas Intermediate crude (WTI) October futures rose 9 cents to $85.64 a barrel.

The slight gains in Asian trade came after both contracts ended last week at their highest levels in more than half a year, having weakened in the two previous weeks.

“Crude oil prices have been primarily driven by the anticipation of additional supply cuts from major oil-producing nations, Russia and Saudi Arabia,” said Sugandha Sachdeva, executive vice president and chief strategist at Acme Investment Advisors.

Sachdeva noted, however, that the steady increase in US oil production could limit further significant gains in price.

Russian Deputy Prime Minister Alexander Novak said earlier that Russia had agreed with partners in the Organization of the Petroleum Exporting Countries (OPEC) on the parameters for continued export cuts. An official announcement with details of the planned cuts is expected this week.

Russia has already said it will cut exports by 300,000 barrels per day (bpd) in September, following a 500,000 bpd cut in August. Saudi Arabia is also expected to roll over a voluntary 1 million bpd cut into October.

Meanwhile in China, manufacturing activity unexpectedly expanded in August, data from Caixin’s manufacturing PMI survey indicated, reducing some of the pessimism about the economic health of the world’s largest oil importer.

A series of economic support measures announced by Beijing last week, such as deposit rate cuts at some of the country’s largest state-owned banks and an easing of borrowing rules for home buyers, have also supported prices.

However, investors continue to await more substantial moves to prop up the country’s embattled property sector, which has been one of main drags on the Chinese economy since its emergence from the pandemic.