Oil Prices Rise on Potential OPEC+ Supply Cuts

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
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Oil Prices Rise on Potential OPEC+ Supply Cuts

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson

Oil prices rose on Thursday on mounting supply tightness concerns amid disruptions to Russian exports, the potential for major producers to cut output, and the partial shutdown of a US refinery.

Brent crude rose 59 cents, or 0.6%, to $101.81 a barrel by 0400 GMT, while US West Texas Intermediate crude was up 42 cents, or 0.4%, at $95.31 a barrel, Reuters reported.

Both crude oil benchmark contracts touched three-week highs on Wednesday after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will cut production to support prices.

Also, discussions on an agreement on Iran's nuclear program remain stalled, calling into question any resumption of its exports.

"Brent crude oil prices rebounded above the $100/barrel mark following Saudi officials showing willingness to defend prices via an OPEC+ production cut if necessary," Citi analysts said in a note.

However, there is still uncertainty ahead for OPEC+ to justify an output reduction amid ongoing negotiations around the Iranian nuclear deal, and a deteriorating macroeconomic picture as the energy crunch gets worse, the Citi analysts added.

In the United States, the world's biggest oil consumer, BP reported shutting some units its Whiting, Indiana, refinery after an electrical fire on Wednesday. The 430,000 barrel-per-day plant is a key supplier of fuels to the central US and the city of Chicago.

Talks between the European Union, the US and Iran to revive the 2015 nuclear deal are continuing with Iran saying it had received a response from the United States to the EU's "final" text to resurrect the agreement.

OPEC sources told Reuters that any cuts by OPEC+ are likely to coincide with a return of Iranian oil to the market, should Tehran secure a nuclear deal with world powers.

Falling US crude and product stockpiles also added to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to Aug. 19 at 421.7 million barrels, steeper from analysts' expectations in a Reuters poll for a 933,000-barrel drop.

The bullish impact was countered by a drawdown in gasoline inventories that was less than expected, reflecting tepid demand.

US gasoline stocks fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a 1.5 million-barrel drop.

Overall US gasoline demand sunk in the most recent period, leaving the four-week average of daily gasoline product supplied 7% below the year-earlier period.



Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.