Oil jumps more than $3 as OPEC+ contemplates biggest production cut since 2020

  • Sources say that OPEC + is considering cutting more than one million barrels per day
  • Interest rates and a strong dollar weigh on the markets
  • Looming EU Ban on Russian Offshore Oil Trade

HOUSTON (Reuters) – Oil prices jumped more than $3 a barrel on Monday as OPEC+ considers cutting production by more than 1 million barrels per day to prop up prices, in what would be their biggest cut since the start of the coronavirus outbreak. -19 pandemic.

Brent crude futures for December delivery rose $3.02 to $88.16 a barrel, up 3.6% by 11:20 am. ET (1520 GMT). US West Texas Intermediate crude rose $3.20, or 4%, to $82.69 a barrel.

Oil prices have fallen for four consecutive months since June, as the COVID-19 shutdown in China, the largest energy consumer, hurt demand while higher interest rates and a stronger US dollar weighed on global financial markets.

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OPEC+ sources told Reuters that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are considering cutting production by more than 1 million barrels per day ahead of Wednesday’s meeting.

An OPEC source added that this figure did not include additional voluntary cuts for individual members.

Most traders were expecting cuts of about 50,000 barrels per day, said Dennis Kessler, senior vice president of trading at BOK Financial.

If agreed, this would be the group’s second consecutive monthly cut after cutting production by 100,000 barrels per day last month.

Two OPEC sources said that OPEC+ missed its production targets by about three million barrels per day in July, as sanctions imposed on some members and reduced investment by others hampered its ability to increase production.

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While spot Brent prices may strengthen in the short term, concerns about a global recession are likely to limit the upside, advisory firm FGE said.

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

The dollar index fell for the fourth consecutive day on Monday, after touching a two-decade high. A cheaper dollar can support the demand for oil and support prices.

Goldman Sachs said it believed that the OPEC+ production cut could help remedy the exodus of large numbers of oil investors, which has underperformed fundamentals in prices.

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(covering) Noah Browning Additional reporting by Florence Tan and Moyo Zhou Editing by David Goodman, Paul Simao and David Gregorio

Our criteria: Thomson Reuters Trust Principles.

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