Oil prices surged in trade on Nov. 6 after Saudi Arabia and Russia, the world’s top oil exporters, announced their decision to maintain additional voluntary oil supply cuts through the year’s end.
Brent crude, the international benchmark for oil prices, traded at $85.97 per barrel, increasing by $1.08 from the previous trading session. U.S. West Texas Intermediate crude rose by $1.30 to $81.81 per barrel.
The increase in oil prices came after Saudi Arabia stated on Nov. 5 that it would extend the voluntary cut of 1 million barrels per day through December. The country has aimed to produce 9 million barrels per day.
Russia followed suit, stating that it would continue the extra voluntary supply cut of 300,000 barrels per day from its crude oil and petroleum product exports to the global market through the end of the year.
Russian Deputy Prime Minister Alexander Novak said the measure will be reviewed in December to decide on whether to deepen the supply cut or increase production, according to the government’s website.
This additional cut comes “to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets,” he said.
OPEC+, which is made up of the countries of the Organization of the Petroleum Exporting Countries (OPEC) and leading allies, including Russia, has been cutting output since last year in what it says is preemptive action to maintain market stability.
Escalation in Middle East
The World Bank has warned that an escalation of the latest conflict in the Middle East could send crude oil prices to as high as $157 per barrel.The international organization anticipates that oil prices will average $90 per barrel in the current quarter and decline to an average of $81 per barrel next year as global economic growth slows.
But the outlook for energy prices “would darken quickly if the conflict were to escalate,” the World Bank noted. A “large disruption” incident would shrink worldwide oil supplies by 6 million to 8 million barrels per day, lifting the cost of a barrel of oil to as high as $157.
For the first time in years, the global economy would endure a “dual energy shock” from the wars in Ukraine and the Middle East if the conflict surrounding Israel were to escalate, according to Indermit Gill, the World Bank’s chief economist and senior vice president for development economics.
“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s—Russia’s war with Ukraine,” Mr. Gill said. “That had disruptive effects on the global economy that persist to this day. Policymakers will need to be vigilant.”
