Oil Holds Losses as Saudi Pledge Wrestles With Bearish Outlook

(Bloomberg) -- Oil extended its run of declines as key market gauges painted a bearish picture, even after Saudi Arabia pledged that OPEC+ supply cuts would outweigh rising stockpiles. 

Global benchmark Brent erased an earlier gain, trading near $77 a barrel after dropping more than 6% in the preceding three sessions. Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg News that supply cuts would “overcome” an expected inventory build in the first quarter, and could be continued further into 2024 if needed.

The Organization of Petroleum Exporting Countries and its allies surprised the market last week with new curbs of about 900,000 barrels a day, but traders remain unconvinced as to whether it will be fully implemented. 

Production from outside the alliance has consistently surpassed expectations this year, dampening market bullishness. Nearby timepsreads have consistently softened in recent days, pointing to continued concerns about an oversupply.   

Read More: OPEC+ Cuts Can ‘Absolutely’ Stay Past March, Saudi Minister Says

The market is also grappling with how to deploy risk in the final month of a year in which Brent futures at one point slumped to $70 a barrel, but also threatened a rally to $100.

“There may be some slippage here and there, but overall I think cuts will largely be delivered,” said Bjarne Schieldrop, chief commodities analyst at SEB. “It was a good and solid cut, and a credible one as well. It won’t drive Brent to $100, but it will backstop the downside.”

Meanwhile, Russian President Vladimir Putin will travel to the United Arab Emirates and Saudi Arabia this week, according to people familiar with the plans. Moscow is a key member of the broader OPEC+ grouping.

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