Group of producers is expected to cut output by more than 1-million barrels a day at a meeting scheduled for Wednesday
04 October 2022 - 12:38
by Agency Staff
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.
An oil refinery is seen in this file photograph. Picture: REUTERS
London — Oil prices rose on Tuesday as expectations that Opec+ may agree to a large cut in crude output on Wednesday offset concerns about the global economy.
Brent crude was up 64c, or 0.7%, to $89.50 a barrel by 8.23am GMT after gaining more than 4% in the previous session. West Texas Intermediate futures rose 46c, or 0.6%, to $84.09, having gained more than 5% in the previous session.
Opec and allied producers, known collectively as Opec+, is expected to cut output by more than 1-million barrels a day at their first in-person meeting since 2020 on Wednesday, according to Opec sources.
Voluntary cuts by individual members could come on top of this, making it their largest cut since the start of the Covid-19 pandemic, the sources said.
“We expect a substantial cut to be made, which will not only help to tighten the physical fundamentals, but sends an important signal to the market,” Fitch Solutions said in a note.
Kuwait’s oil minister said Opec+ would make a suitable decision to guarantee energy supply and to serve the interests of producers and consumers.
Edward Moya, a senior analyst with Oanda, said: “Despite everything going on with the war in Ukraine, Opec+ has never been this strong and they will do whatever it takes to make sure prices are supported here.”
The producers’ group has boosted output this year after record cuts that were implemented in 2020 when the pandemic slashed demand. But in recent months, it has failed to meet planned output increases, missing by 3.6-million barrels a day in August.
The production target cut being considered was justified by the sharp decline in oil prices from recent highs, said Goldman Sachs, adding that this reinforced its bullish outlook on oil.
Four months running
Oil prices have dropped for four straight months as Covid-19 lockdowns in top oil importer China curbed demand while interest rate hikes and a soaring dollar pressured global financial markets.
Most central banks have embarked on the most aggressive round of rate rises in decades, sparking fears of a global economic slowdown.
However, Swiss lender UBS said it saw several bullish factors going into the year-end that could send crude prices higher, including “recovering Chinese demand, further Opec+ supply cuts, the end of the US Strategic Petroleum Reserve (SPR) release and the coming EU ban on Russian crude exports”.
US crude oil stocks are estimated to have increased by about 2-million barrels in the week to September 30, according to a preliminary Reuters poll on Monday.
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 gain as Opec+ prepares to meet on cuts
Group of producers is expected to cut output by more than 1-million barrels a day at a meeting scheduled for Wednesday
London — Oil prices rose on Tuesday as expectations that Opec+ may agree to a large cut in crude output on Wednesday offset concerns about the global economy.
Brent crude was up 64c, or 0.7%, to $89.50 a barrel by 8.23am GMT after gaining more than 4% in the previous session. West Texas Intermediate futures rose 46c, or 0.6%, to $84.09, having gained more than 5% in the previous session.
Opec and allied producers, known collectively as Opec+, is expected to cut output by more than 1-million barrels a day at their first in-person meeting since 2020 on Wednesday, according to Opec sources.
Voluntary cuts by individual members could come on top of this, making it their largest cut since the start of the Covid-19 pandemic, the sources said.
“We expect a substantial cut to be made, which will not only help to tighten the physical fundamentals, but sends an important signal to the market,” Fitch Solutions said in a note.
Kuwait’s oil minister said Opec+ would make a suitable decision to guarantee energy supply and to serve the interests of producers and consumers.
Edward Moya, a senior analyst with Oanda, said: “Despite everything going on with the war in Ukraine, Opec+ has never been this strong and they will do whatever it takes to make sure prices are supported here.”
The producers’ group has boosted output this year after record cuts that were implemented in 2020 when the pandemic slashed demand. But in recent months, it has failed to meet planned output increases, missing by 3.6-million barrels a day in August.
The production target cut being considered was justified by the sharp decline in oil prices from recent highs, said Goldman Sachs, adding that this reinforced its bullish outlook on oil.
Four months running
Oil prices have dropped for four straight months as Covid-19 lockdowns in top oil importer China curbed demand while interest rate hikes and a soaring dollar pressured global financial markets.
Most central banks have embarked on the most aggressive round of rate rises in decades, sparking fears of a global economic slowdown.
However, Swiss lender UBS said it saw several bullish factors going into the year-end that could send crude prices higher, including “recovering Chinese demand, further Opec+ supply cuts, the end of the US Strategic Petroleum Reserve (SPR) release and the coming EU ban on Russian crude exports”.
US crude oil stocks are estimated to have increased by about 2-million barrels in the week to September 30, according to a preliminary Reuters poll on Monday.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.