Oil jumps as OPEC+ mulls biggest production cut since pandemic

Oil climbed toward $82 a barrel on indications the OPEC+ alliance is considering slashing production by more than 1 million barrels a day to revive plunging prices when it meets this week.

A reduction of that magnitude would be the biggest since the pandemic, although OPEC+ delegates said a final decision on the size of the cuts won’t be made until ministers gather in Vienna on Wednesday. West Texas Intermediate rose more than 2%, putting prices on track for the first gain in three sessions.

“The slide in oil prices is likely over,” said Ed Moya, senior market analyst at Oanda Group. “Energy traders turned pessimistic over the summer given global slowdown fears, but now it seems the risks for oil are to the upside.”

Oil fell by a quarter in the three months through September as a slowing global economy sapped demand. Banks including UBS Group AG and JPMorgan Chase & Co. said the Organisation of Petroleum Exporting Countries and its allies may need to trim output by least 500 000 barrels a day to stabilize prices.

A cut of more than 1 million barrels a day “will be enough to put a floor under prices,” said Phil Flynn, a senior market analyst at Price Futures Group.

A large output cut may draw criticism from the US and other major consuming-nations, where energy-driven inflation has forced central banks to aggressively jack up interest rates. This week’s OPEC+ meeting will be the first in-person gathering since March 2020. The group is deciding on supply for November.

  • WTI for November delivery rose 2.6% to $81.54 a barrel at 7:31 a.m. in London.
  • Brent for December settlement gained 2.5% to $87.25 a barrel.

In Asia, China issued new quotas for fuel exports and crude imports last week as it seeks to revive its economy, adding to the bullish outlook for oil. The world’s biggest crude importer has seen energy demand take a tumble due to virus lockdowns and a property slump this year.

“It’s only going to be a matter of time before oil returns to $100 a barrel, especially with supplies set to get tighten toward the end of the year,” said Suvro Sarkar, an energy analyst at DBS Bank Ltd. in Singapore.

© 2022 Bloomberg

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