Oil Rises Around $4 as OPEC+ Weighs Biggest Production Cut Since 2020

Oil Rises Around $4 as OPEC+ Weighs Biggest Production Cut Since 2020
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  • OPEC+ considers cut of more than 1 million bpd, according to sources
  • Interest rates and strong dollar weigh on the markets

HOUSTON, Oct 3 (Reuters) – Oil prices rose nearly $4 a barrel on Monday as OPEC+ considered cutting output by more than 1 million barrels per day (bpd) to prop up prices with what would be its biggest cut since the start of the COVID-19 pandemic. 19 pandemic.

Brent crude futures for December delivery rose $3.72 to $88.86 a barrel, a 4.4% gain. US West Texas Intermediate crude rose $4.14, or 5.2%, to $83.63 a barrel.

Oil prices have declined for four straight months since June as COVID-19 lockdowns in top energy consumer China hit demand, while rising interest rates and a rising US dollar weighed. in world financial markets.

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The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, are considering a production cut of more than 1 million bpd ahead of Wednesday’s meeting, OPEC+ sources told Reuters.

That figure does not include Additional Voluntary Cuts by individual members, an OPEC source added.

Most traders had expected cuts of around 50,000 bpd, said Dennis Kissler, senior vice president of trading at BOK Financial.

If agreed, it will be the group’s second consecutive monthly cut after cutting output by 100,000 bpd last month.

“After a year of tolerating extremely high prices, missed targets and severely tight markets, the (OPEC+) alliance is apparently not hesitating when it comes to moving quickly to support prices amid deteriorating economic prospects,” said the analyst at Oanda Market, Craig Erlam. . .

OPEC+ missed its production targets by nearly 3 million bpd in July, two sources at the producer group said, as sanctions on some members and underinvestment by others hampered their ability to ramp up output.

US crude oil stockpiles were expected to rise by around 2 million last week, a preliminary Reuters poll showed on Monday. Inventories at the Cushing, Oklahoma storage facility rose by 730,297 barrels to 29.6 million barrels, according to a market source, citing Genscape data.

While fast Brent prices could strengthen in the short term, concerns about a global recession are likely to cap the upside, consultancy FGE said.

“If OPEC+ decides to cut production in the short term, the resulting increase in additional OPEC+ capacity will likely put further downward pressure on prices in the long term,” it said in a note on Friday.

The dollar index fell for the fourth day in a row on Monday after hitting its highest level in two decades. A cheaper dollar could boost oil demand and support prices.

Goldman Sachs said it believes OPEC+’s supply cut could help remedy the large exodus of oil investors that has left prices below fundamentals.

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Reporting by Noah Browning Additional reporting by Florence Tan and Muyu Xu Editing by Paul Simao, David Gregorio, and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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