Crude oil prices increased on Tuesday, as hopes that OPEC+ will agree to a significant cut in petroleum supply on Wednesday countered concerns about the global economy. Brent crude was up 64 cents, or 0.7%, to $89.50 a barrel by 0823 GMT after gaining more than 4% in the previous session. Crude futures in the United States increased 46 cents, or 0.6%, to $84.09 per barrel after rising more than 5% the previous session.
According to OPEC sources, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, are set to cut output by more than 1 million barrels per day (BPD) during their first in-person meeting since 2020 on Wednesday.
Individual member voluntary cuts could be added on top of this, making it OPEC’s largest drop since the start of the COVID-19 epidemic, according to OPEC sources. “We anticipate a significant cut, which will not only assist to tighten physical fundamentals but will also send an important signal to market,” Fitch Solutions said in a note.
Kuwait’s oil minister said OPEC+ would make a reasonable choice to assure energy supply and fulfill the interests of producers and consumers. “Despite everything going on with the crisis in Ukraine, OPEC+ has never been this powerful, and they will do everything it takes to ensure prices are supported here,” said Edward Moya, senior analyst at OANDA.
OPEC+ has increased output this year after imposing record cutbacks in 2020 due to a pandemic that reduced demand. However, in recent months, the organization has failed to reach its targeted output increases, falling short by 3.6 million BPD in August. The proposed production cut was justified by the significant drop in crude oil prices from recent highs, according to Goldman Sachs, who added that this bolstered its optimistic outlook on crude oil.
Crude oil prices have fallen for four months in a row as COVID-19 lockdowns in top crude oil importer China dampened demand, while interest rate hikes and a surging US currency weighed on global financial markets.
Major central banks have launched the most aggressive wave of rate rises in decades, triggering fears of a worldwide economic slump. However, Swiss bank UBS warned towards the end of the year that numerous bullish reasons, including “recovering Chinese demand, OPEC+ additional supply cuts, the end of the US Strategic Petroleum Reserve (SPR) release, and the anticipated EU embargo on Russian crude oil exports,” may propel crude prices higher.
U.S. crude oil stocks were projected to have climbed by roughly 2 million barrels in the week to Sept. 30, a preliminary source survey showed on Monday.
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