Oil prices rebounded in early trade on Friday, as the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, decided to maintain their current oil output policy. This news helped recoup some of the losses from the previous trading session, which were triggered by unconfirmed reports of a ceasefire between Israel and Hamas.
Brent crude futures rose by 0.6%, or 50 cents, reaching $79.20 a barrel at 0155 GMT, while West Texas Intermediate crude futures gained 0.5%, or 40 cents, reaching $74.22 a barrel.
On Thursday, both contracts had settled more than 2% lower due to speculation about a ceasefire. However, a Qatari official clarified that there was no ceasefire and stated that Hamas had received a ceasefire proposal earlier in the week.
Geopolitical tensions and concerns over shipping disruptions also continue to impact oil prices. Yemen’s Houthi forces have been targeting vessels in the Red Sea, leading to further disruptions in global trade. At the same time, the group claimed responsibility on Thursday for targeting an unidentified British merchant vessel in the Red Sea.
Furthermore, on Thursday, OPEC+ confirmed that they would maintain their current oil output policy and review it in March to determine if an extension of voluntary production cuts is necessary for the second quarter. The group had previously announced output cuts of 2.2 million barrels per day (bpd) for the first quarter in November.
ANZ Research analysts expect the production cuts to keep supply tight in the first quarter. They also anticipate that non-OPEC production increases will stabilize and that US output growth will slow to 300,000 bpd in 2024, compared to 800,000 bpd last year.
Supporting oil prices are the US Federal Reserve’s decision to maintain the benchmark overnight interest rate in the 5.25-5.50% range. Federal Reserve Chair Jerome Powell’s comments that interest rates have peaked and are likely to decrease in the coming months also had a positive impact. Lower interest rates can stimulate economic growth and increase oil demand by reducing consumer borrowing costs.
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