Oil prices on track for sixth consecutive weekly increase as producers commit to output cuts

Oil prices climbed for a consecutive second day on Friday, marking their sixth consecutive week of gains. This surge followed a commitment from Saudi Arabia and Russia, the world's second and third-largest crude oil producers, to curtail output through the coming month. In the early hours of trading, Brent crude futures for October saw an increase of 0.4 percent, or 30 cents, reaching $85.44 per barrel by 0042 GMT. Similarly, on Thursday, Brent crude rebounded from a 2 percent decline in the preceding Wednesday's session, positioning futures for a weekly increase of 0.4 percent. This represented the most prolonged series of weekly advances observed in the ongoing year.

The recent declaration by Saudi Arabia to extend a voluntary reduction of 1 million barrels per day (bpd) in oil production for an additional month, encompassing September, paved the way for the upcoming gathering of the Organization of the Petroleum Exporting Countries (OPEC) and its coalition of allies, including Russia, collectively known as OPEC+. Expected to convene shortly, the Joint Ministerial Monitoring Committee of OPEC+ is anticipated to uphold the existing oil output strategy. Nevertheless, Saudi Arabia's commitment to curtail production, coupled with Russia's intention to lower oil exports by 300,000 bpd in September, has prompted concerns about potential supply shortages, thereby consequently lending support to oil prices.

Earlier in June, OPEC+ had reached a comprehensive agreement to limit supply until 2024. During that announcement, Saudi Arabia had pledged to further reduce production for July, subsequently extending this commitment to August. Responding to Saudi Arabia's decision, White House national security spokesperson John Kirby affirmed that the United States, as the world's largest oil producer, would continue collaborating with both producers and consumers to ensure the energy market remains conducive to growth. Despite these supply reductions, recent U.S. economic data highlighting tight labor markets and a decelerating service sector have evoked concerns about future demand.

In addition to these economic indicators, the euro zone experienced a more severe decline in business activity in July than initially anticipated. Furthermore, the Bank of England raised its primary interest rate by a quarter percentage point, reaching a 15-year peak. The bank also cautioned that elevated borrowing costs might endure for a considerable duration. Heightened borrowing expenses for both businesses and consumers can potentially hamper the growth of the economy, thereby consequently influencing oil demand.