Oil prices experienced a decline on Wednesday, despite commitments made by Saudi Arabia and Russia to maintain crude output cuts until the end of 2023. The drop in prices was a result of concerns over macroeconomic headwinds impacting global demand for oil.
Brent crude oil futures fell $2.02, or 2.22%, to $88.90 a barrel, while U.S. West Texas Intermediate crude (WTI) dropped $2.10, or 2.35%, to $87.13 per barrel. The OPEC+ Joint Ministerial Monitoring Committee (JMMC) held an online meeting on Wednesday, during which the group’s output policy was left unchanged.
However, oil prices continue to face pressure due to concerns over weakening demand caused by macroeconomic factors. Analyst Callum Macpherson from Investec noted that market attention has shifted from short-term tightness to the implications of higher interest rates and a subdued macro environment. These concerns are likely to be addressed during the next JMMC meeting on November 26.
Saudi Arabia confirmed its commitment to a voluntary crude supply cut of 1 million barrels per day (bpd) until the end of the year. Similarly, Russia stated that it will maintain its current 300,000 bpd crude export cuts until the end of the year, and will review its voluntary 500,000 bpd output cut in November.
Russian Deputy Prime Minister Alexander Novak praised the joint voluntary cuts made by Russia and Saudi Arabia, noting that they have helped to balance the oil markets. He also highlighted the positive impact of the Kremlin’s export ban on diesel and gasoline, which has helped stabilize domestic fuel prices. There have been reports that Russia may ease its diesel ban in the coming days.
One factor that may be contributing to the decline in oil prices is the strength of the U.S. dollar. PVM analyst John Evans noted that the current rally in the dollar could have a negative impact on oil markets, as a strong dollar makes oil more expensive for holders of other currencies, potentially dampening demand.
Overall, oil prices continue to face downward pressure due to concerns over weakening demand and the influence of macroeconomic factors. While Saudi Arabia and Russia have pledged to maintain output cuts, the impact of these efforts on global oil prices remains uncertain.