Thursday December 01, 2022

Oil up near $90 as OPEC+ considers output cut

By News Desk
September 30, 2022

NEW YORK: Oil prices rose on Thursday for a second day, briefly touching $90 per barrel as leading OPEC+ members were discussing an output cut next week, but gains moderated on a stronger dollar and weak economic outlook.

Brent crude futures for November rose 18 cents to $89.50 a barrel, after briefly rising above $90 a barrel. U.S. crude futures for November rose 31 cents to $82.47.

Leading members of the Organization of the Petroleum Exporting Countries and their allies known as OPEC+ have begun discussions about an oil output cut when they meet on Oct. 5, two sources from the producer group told Reuters.

One OPEC source said a cut looks likely, but gave no indication of volumes.

Reuters reported this week that Russia is likely to propose that OPEC+ reduce oil output by about 1 million barrels per day (bpd). Russia faces challenges in maintaining oil production due to Western sanctions on its energy and financial sectors after it sent troops Ukraine earlier this year.

Prices have nevertheless fallen sharply this month due to fears about the global economy and a rally in the U.S. dollar after the Federal Reserves raised rates.

The impact of any OPEC+ agreement to cut output is likely to be mitigated by the inability of many members of the group to produce at their agreed targets.

In August, OPEC+ was producing 3.58 million bpd below its targets as members struggle with sanctions and underinvestment.

About 157,706 bpd of oil production was shut in the Gulf of Mexico as of Wednesday following Hurricane Ian, according to federal data. Production is expected to return in coming days. read more

"What is limiting the downside a bit is the inventory draws in the U.S. released yesterday and oil product inventories declines in Singapore and Northern Europe today," said Giovanni Staunovo, analyst at Swiss bank UBS.

Both crude benchmarks rebounded from nine-month lows early this week, buoyed by a temporary dive in the dollar index and a larger than expected U.S. fuel inventory drawdown.

The dollar index rose again on Thursday, dampening investor risk appetite and stoking recession fears.

"For now, fundamentals are taking a back seat, and broader market sentiment is driving prices lower," said Matt Smith, lead oil analyst for the Americas at Kpler.

In China, the world's biggest crude oil importer, travel during the forthcoming week-long national holiday is set to hit its lowest level in years as Beijing's zero-Covid rules keep people at home while economic woes curb spending.