Oil gains nearly 3% after OPEC+ delays output hike
A pumpjack pumps oil in the Inglewood Oil Field as seen from the Kenneth Hahn State Recreation Area on July 13, 2022 in Los Angeles, California.
Patrick T. Fallon | AFP | Getty Images
Oil prices rose nearly 3% on Monday on a decision by OPEC+ to delay by a month plans to increase output, while the market braced for a crucial week that includes the U.S. presidential election and a key meeting in China.
Brent futures gained $1.98 per barrel, or 2.71%, to close at $75.08. U.S. West Texas Intermediate crude added $1.98 a barrel, or 2.85%, to settle at $71.47.
On Sunday, OPEC+, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, said it would extend its output cut of 2.2 million barrels per day (bpd) for another month in December, with an increase already delayed from October because of falling prices and weak demand.
The grouping had been due to increase output by 180,000 bpd from December.
“Considering ongoing economic growth concerns, we believe the group wants more clarity on the economic impact of the interest rate cuts in the US and the fiscal and monetary policy easing in China,” said UBS analyst Giovanni Staunovo.
“The group should also have clarity on the next U.S. president and the impact of compensation cuts from countries that produced above their ceiling in the past.”
OPEC+ is set to gradually unwind the 2.2-million-bpd cut over the coming months, while another 3.66 million bpd of production cuts will stay until the end of 2025.
Brent and WTI posted weekly declines last week of about 4% and 3%, respectively, as record U.S. output weighed on prices. But both contracts edged up on Friday on reports that Iran could launch a retaliatory strike on Israel within days.
On Thursday, U.S. news website Axios said Israeli intelligence suggested that Iran was preparing to attack Israel from Iraq within days, citing two unidentified Israeli sources.
Markets also await Tuesday’s U.S. presidential election, with polls showing Democratic Vice President Kamala Harris and Republican former President Donald Trump neck-and-neck.
And on Thursday, economists expect the U.S. Federal Reserve to cut interest rates by 25 basis points.
Oil price volatility will be high this week, analysts said, with market participants awaiting Iran’s response to recent Israeli attacks, the U.S. election outcome and central bank rate decisions.
In China, the Standing Committee of the National People’s Congress meets from Monday to Friday and is expected to approve additional stimulus to boost the slowing economy, though analysts say the bulk may go to help cut local government debt.
