Talk of Opec+ cutting supply to stem the recent drop in prices offers further support
27 September 2022 - 13:04
byAlex Lawler
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London — Oil rose more than 1% on Tuesday from a nine-month low a day earlier, supported by supply curbs in the Gulf of Mexico as Hurricane Ian approached and a softening in the dollar.
Analyst expectations that Opec and allies, known as Opec+, may take action to stem the drop in prices by cutting supply also lent support. The grouping is scheduled to meet to set policy on October 5.
Brent crude rose $1.11, or 1.3%, to $85.17 a barrel by 8.10am GMT. On Monday it reached $83.65, the lowest since January. West Texas Intermediate was up $1.08, or 1.4%, at $77.79.
Crude soared in early 2022, with Brent coming close to its all-time high of $147 in March after Russia invaded Ukraine, adding to supply concerns. Worries about recession, high interest rates and dollar strength have weighed on the market since then.
“Oil is currently under the influence of financial forces,” said Tamas Varga of oil broker PVM. “In the meantime, relief rallies, like the one this morning caused by Hurricane Ian in the US Gulf, are viewed as temporary phenomena.”
A lull in the strength of the US dollar, which earlier hit a 20-year high, provided some support. A strong dollar makes crude more expensive for buyers using other currencies and tends to weigh on risk assets.
Supply cuts were back in focus on Tuesday offering further support. BP and Chevron said on Monday they shut production at offshore platforms in the Gulf of Mexico as Hurricane Ian approached the region.
The price drop has raised speculation that Opec+ could intervene. Iraq’s oil minister on Monday said the group was monitoring prices and didn’t want a sharp increase or a collapse.
“Only a production cut by Opec+ can break the negative momentum in the short run,” UBS analysts Giovanni Staunovo and Wayne Gordon said.
In focus also on Tuesday will be the latest US inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks. The American Petroleum Institute’s report is due out at 20.30pm GMT.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil prices jump in response to dollars lull
Talk of Opec+ cutting supply to stem the recent drop in prices offers further support
London — Oil rose more than 1% on Tuesday from a nine-month low a day earlier, supported by supply curbs in the Gulf of Mexico as Hurricane Ian approached and a softening in the dollar.
Analyst expectations that Opec and allies, known as Opec+, may take action to stem the drop in prices by cutting supply also lent support. The grouping is scheduled to meet to set policy on October 5.
Brent crude rose $1.11, or 1.3%, to $85.17 a barrel by 8.10am GMT. On Monday it reached $83.65, the lowest since January. West Texas Intermediate was up $1.08, or 1.4%, at $77.79.
Crude soared in early 2022, with Brent coming close to its all-time high of $147 in March after Russia invaded Ukraine, adding to supply concerns. Worries about recession, high interest rates and dollar strength have weighed on the market since then.
“Oil is currently under the influence of financial forces,” said Tamas Varga of oil broker PVM. “In the meantime, relief rallies, like the one this morning caused by Hurricane Ian in the US Gulf, are viewed as temporary phenomena.”
A lull in the strength of the US dollar, which earlier hit a 20-year high, provided some support. A strong dollar makes crude more expensive for buyers using other currencies and tends to weigh on risk assets.
Supply cuts were back in focus on Tuesday offering further support. BP and Chevron said on Monday they shut production at offshore platforms in the Gulf of Mexico as Hurricane Ian approached the region.
The price drop has raised speculation that Opec+ could intervene. Iraq’s oil minister on Monday said the group was monitoring prices and didn’t want a sharp increase or a collapse.
“Only a production cut by Opec+ can break the negative momentum in the short run,” UBS analysts Giovanni Staunovo and Wayne Gordon said.
In focus also on Tuesday will be the latest US inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks. The American Petroleum Institute’s report is due out at 20.30pm GMT.
Reuters
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