Oil prices rose in Asian trade on Monday after the OPEC+ extended its current run of production cuts into 2025, although speculation over a ceasefire in Gaza kept gains limited.
Lingering concerns over sluggish demand also weighed following softer-than-expected purchasing managers index data from top oil importer China, while fears of high for longer interest rates saw crude nursing losses from last week.
Brent oil futures expiring in August rose 0.3% to $81.33 a barrel, while West Texas Intermediate crude futures steadied at $77.0 a barrel by 21:06 ET (01:06 GMT). Both contracts fell between 0.6% and 1% last week.
OPEC+ extends production cuts
The Organization of Petroleum Exporting Countries and allies (OPEC+) decided to extend its current run of production cuts at a meeting held on Sunday.
The cartel, led by Saudi Arabia and Russia, will keep about 5.8 million barrels per day of production offline until at least early-2025.
Specifically, the cartel will maintain 3.6 million bpd of cuts until end-2024, while 2.2 million bpd of cuts will be phased out between October 2024 and September 2025.
The move was widely expected by markets, given that the OPEC+’s cuts were aimed largely at supporting oil prices through tighter markets.
The cartel said it was waiting to see a broader improvement in economic conditions and lower interest rates before it would begin increasing production.
Israel-Hamas ceasefire in focus after new US proposal
U.S. President Joe Biden had last week unveiled a three-phase plan for a ceasefire between Israel and Hamas in Gaza.
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The plan includes a six-week ceasefire and will see Israeli forces retreat from Gaza, while Hamas will release Israeli hostages in exchange for hundreds of Palestinian prisoners. The proposal also opened the door for more aid into Gaza, and called for renewed negotiations between Israel and Hamas over a permanent ceasefire.
Reports said that Hamas leaders had reacted positively to the proposal, while Israel had also agreed tentatively to the deal.
A ceasefire in the region is expected to see traders further price out a geopolitical risk premium from crude. Fears of a worsening Middle East conflict had been a key driver of crude prices in recent months.
