(Bloomberg) — Oil surged at the start of the week as OPEC+ decided to cut output in October and Europe’s energy crisis deepened.
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West Texas Intermediate crude advanced toward $90 a barrel. The Organization of Petroleum Exporting Countries and allies including Russia plan to trim production by 100,000 barrels-a-day next month. The move effectively reverses a symbolic output hike of the same volume in September that was made in response to lobbying from US President Joe Biden.
“Last month’s adjustment provided a nod to the demands of the consumers, this monthly adjustment is a small nod to the concerns of the producers,” said Emily Ashford an analyst at Standard Chartered. “The continuation of the monthly format is allowing OPEC+ to make small but reactive adjustments to market conditions.”
Crude fell sharply last week and generally has trended lower since June as the risk of a global economic slowdown hits markets. Last week, Russian energy giant Gazprom PJSC said gas flows along a key pipeline to Germany would not resume, just after G-7 ministers had endorsed a US-led initiative to cap the price of Russian oil.
The latest surge in European natural gas futures, which posted the biggest intraday jump since March, may be a double-edged sword for oil. While costlier gas can fan additional demand for crude-based fuels, the rally also threatens to plunge the region into a deep recession, denting overall consumption.
Oil’s advance came even as a Bloomberg gauge of the greenback rallied to an all-time high amid a broad shift away from risky assets, including equities, as investors assessed the fallout from Europe’s worsening energy crunch. Usually a stronger dollar is a headwind for commodities such as crude.
Ahead of the OPEC+ session — which falls on a US holiday that may thin trading — most market watchers said they expected no change to supply at this point despite the warning from Riyadh. JPMorgan Chase & Co. said output quotas would be rolled into October as summer surpluses would turn into deficits.
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Source: finance.yahoo.com