Oil prices gain after Saudi Arabia and Russia reaffirm co-operation in crude market

An Israeli army flare illuminates the sky above the northern Gaza Strip. EPA

Oil prices gained on Thursday after declining earlier in the day as Opec+ members Saudi Arabia and Russia reaffirmed their close co-operation in the crude market.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.79 per cent higher at $87.36 a barrel at 4.28pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 1.63 per cent at $84.85 a barrel.

On Wednesday, Brent settled 2.09 per cent lower at $85.82 a barrel. WTI closed down 2.88 per cent at $83.49 a barrel.

In a joint interview on Russian state TV, Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman said the producers would continue to act pre-emptively, while Russia’s Deputy Prime Minister Alexander Novak said the market balance was fragile.

At the Russian Energy Week on Thursday, Mr Novak said the drop in oil prices following Monday's surge suggested that supply risks from the Israel-Gaza war were not as high as previously thought.

"It's kind of hard to forecast at the moment ... if prices are higher, it means that the risks are higher too. I guess now, the risks are gauged as not as high at the moment," Mr Novak said.

Russian President Vladimir Putin on Wednesday said that co-ordination between Opec+ partners would continue.

“This is important for the predictability of the oil market and as a result for the welfare of all humanity,” Mr Putin said at the Russian Energy Week.

Oil prices jumped more than 5 per cent on Monday as traders feared that military clashes between Israel and Hamas would escalate into a broader conflict, potentially disrupting Middle East crude supplies.

The death toll from the Israel-Gaza war is nearing 2,500 as the conflict enters a sixth day.

US President Joe Biden on Wednesday warned Iran to “be careful” after the Hamas attacks.

This followed reports on Monday of Iran's involvement in Hamas’s surprise attack, although the country has denied those claims.

Iran's production has recovered to a five-year high of 3.1 million barrels per day in recent months, despite current sanctions.

Meanwhile, US crude stocks, an indicator of fuel demand, rose by 12.9 million barrels last week, the American Petroleum Institute said.

Analysts polled by Reuters were expecting a gain of 500,000 barrels.

“The good news is that Opec now has a decent spare capacity to stabilise global oil prices thanks to their production cut strategy,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“In the actual geopolitical context, crude oil could further rise towards the $90-$100 a barrel range but a rise beyond the $100 level is unlikely with the morose global economic outlook.”

This week, the International Monetary Fund kept its global economic expansion forecast for 2023 at 3 per cent, below the 3.5 per cent expansion recorded last year, retaining the historical growth average of 3.8 per cent.

The fund estimates growth to hit 2.9 per cent next year, a 0.1 percentage point downgrade from its forecast in July.