Oil prices jumped by nearly 1 per cent on Tuesday, lifted by uncertainty over voluntary output cuts by the Opec+ group of producers, tensions in the Middle East and some encouraging economic signals in Europe.
Brent crude futures rose 63 cents, or 0.8 per cent, to $78.66 a barrel by 0946 GMT. US West Texas Intermediate crude futures were up 66 cents, or 0.9 per cent, at $73.19.
Comments by Saudi Arabia’s energy minister that Opec+ production cuts could continue past the first quarter of 2024 lent some price support, said OANDA analyst Kelvin Wong.
Oil prices had declined on Monday on doubts that Opec+ supply cuts would have a significant impact, said CMC Markets analyst Tina Teng.
On Tuesday, however, the Kremlin said that the cuts agreed by the Opec+ group will take time to kick in.
The Organisation of the Petroleum Exporting Countries and allies including Russia, together known as Opec+, agreed on Thursday to voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024.
At least 1.3 million bpd of those cuts, however, were an extension of voluntary curbs that Saudi Arabia and Russia already had in place.
Meanwhile, the resumption of fighting in the Israel-Hamas war has stoked supply concerns, as did attacks on three commercial vessels in international waters in the southern Red Sea.
Those incidents followed a series of attacks in Middle East waters since war broke out between Israel and Hamas on October 7.
There was a bright spot on the demand side, with European Central Bank board member Isabel Schnabel telling Reuters the bank can take further interest rate hikes off the table after a “remarkable” fall in inflation.
In the United States, however, data on Tuesday showed factory orders fell by more than analysts had expected in October and the most in more than three years, raising concerns about the health of US demand.
That bolstered the view that increases to interest rates are beginning to limit spending, analysts said.