Oil rises $3 as OPEC+ plans biggest production cuts since 2020

  • OPEC+ is considering cuts of more than 1 million bpd, sources said
  • Interest rates, strong dollar weigh on markets
  • The European Union has imposed a ban on Russian offshore oil trade

HOUSTON, Oct 3 (Reuters) – Oil prices rose $3 a barrel on Monday as OPEC+ cut production by 1 million barrels per day (bpd), its biggest cut since the start of Covid-19. International distribution.

Brent crude for December delivery was up $2.99 ​​at $88.13 a barrel, a 3.5% gain, by 12:50 pm ET (1650 GMT). U.S. West Texas Intermediate crude was up $3.33, or 4.2%, at $82.82 a barrel.

Oil prices have continued to fall in the four months since June as COVID-19 lockdowns in top energy consumer China hurt demand, while rising interest rates and a rising U.S. dollar weigh on global financial markets.

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

That number does not include additional voluntary cuts by individual members, an OPEC source added.

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

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

“After a year of enduring very high prices, missed targets and severely tight markets, the (OPEC+) bloc has no hesitation in acting quickly to support prices amid a deteriorating economic outlook,” said Oanda market analyst Craig Erlam. .

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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 low investment by others hampered their ability to raise output.

While Brent prices may strengthen in the short-term, concerns about a global recession may limit upside, FGE said.

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

The dollar index fell for a fourth consecutive day on Monday after hitting its highest level in two decades. A cheap dollar can boost oil demand and support prices.

Goldman Sachs said it hoped OPEC+ supply cuts would help offset a large exodus of oil investors, causing prices to underperform fundamentals.

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(Reporting by Noah Browning, additional reporting by Florence Tan and editing by David Goodman, Paul Simao and David Gregorio)

Our Standards: Thomson Reuters Trust Principles.

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