Oil prices eclipse $87, highest since November
Nancy Vu
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West Texas Intermediate reached more than $87 a barrel, the highest price for crude oil since last November, following the news that Saudi Arabia and Russia announced a fresh extension to their voluntary production cut until the end of the year.
Oil prices jumped on Tuesday after the dual announcement, with futures rising an average of roughly 2%. WTI October futures rose $1.64, or approximately 1.9%. Brent crude has also increased $1.25, roughly 1.4%, to around $90.21 at 10 a.m. EDT.
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On Tuesday, Saudi Arabia announced that it would extend its voluntary production cut of 1 million barrels per day, putting Saudi crude output near 9 million barrels per day over October, November, and December. The reduction will be reviewed on a monthly basis to consider whether to deepen the cut or increase production.
Another OPEC+ member, Russia, is also prolonging its voluntary cuts through the end of the year to “maintain stability and balance” on oil markets, Deputy Prime Minister Alexander Novak said on Tuesday. Russia has previously said it would voluntarily cut oil exports by 500,000 barrels per day in August and by 300,000 bpd in September. The country will also be reducing its oil production by 500,000 barrels per day until the end of 2024.
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The resulting rise in gas prices is expected to hit the Biden administration heading into the election year — and will make it harder to refill the Strategic Petroleum Reserve, a vow of Energy Secretary Jennifer Granholm.
The Energy Department has targeted a price range of about $67 to $72 a barrel for purchases to refill the SPR. It had to cancel a planned purchase of 6 million barrels of oil this summer — leaving the nation’s emergency stockpile at its lowest level in 40 years. The energy secretary acknowledged that the reserve might not be refilled during Biden’s first term. However, the administration bought 6.3 million barrels earlier this year.