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OPEC+ Keeps Output Cuts, Oil Prices Surge to $85.92
Opec+ Cuts Oil
Oil prices ticked up on Monday after an OPEC+ panel maintained current oil output cuts amid concerns over global fuel demand.
Brent crude oil futures, the international benchmark, were up 11 cents to $85.92 a barrel in afternoon trading. U.S. West Texas Intermediate (WTI) crude futures were also up 10 cents to $79.56 a barrel.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, said on Monday that it would keep current output policy in place. The panel will meet in December to review levels of supply and demand, and assess whether further action is needed.
The OPEC+ decision comes after a surge in oil prices earlier this year that was driven by a revival in the global economy and a sharp drop in OPEC+ output. However, rising coronavirus cases in many countries have raised concerns about the sustainability of the recovery, and analysts predict a slower second half of the year.
The group’s decision to stick with current levels of output was seen as a sign that OPEC+ believes the global fuel demand recovery is still on track.
Analysts said that the market was already expecting OPEC+ to maintain current output levels for now and that the decision had a limited effect on prices.
“The market is still focused on the potential upside of a stronger demand recovery than expected, which has allowed OPEC+ to take a more cautious approach for now,” said Norbert Rücker, head of commodities research at Julius Baer.
Oil prices rose
Oil prices rose on Monday after OPEC+ (Organization of the Petroleum Exporting Countries and its allies) kept its output cuts in place, offering some respite for the oil market. Brent crude oil futures were up 11 cents to $85.92 per barrel by 0422 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 9 cents to $78.93 per barrel.
The OPEC+ panel, which includes global producers such as Saudi Arabia, Russia, and US shale producers, held output cuts at seven million barrels per day (bpd) until the end of March 2021. The decision is intended to keep supply in line with global demand and keep prices from falling too quickly.
OPEC+ has been cutting production since April 2020 to help support prices amid the impact of the coronavirus pandemic on global demand. The panel also said it will continue to review the market at its next meeting in December 2020.
Analysts said the decision by OPEC+ to keep production cuts in place will help to rebalance the oil market, although it may not be enough to push prices back up to pre-coronavirus levels.
“The extension of cuts will help to balance the market but it won’t be enough to push back up to pre-coronavirus levels,” said Olivier Jakob, managing director of Petromatrix.
Oil prices have dropped significantly over the past year, as the pandemic caused a collapse in demand for the commodity. The continued output cuts by OPEC+ are intended to prevent prices from dropping too far and to help the oil market recover.
Analysts said the move was expected and there was no major surprise from the meeting, given the current situation in the oil market.
“Oil prices rose on Monday, as OPEC+ maintained its output cuts,” said James Goodfellow, analyst at Goodfellow Capital. “The decision was expected and there was no major surprise.”
Oil prices rose on Monday after an OPEC+ panel maintained its production cuts in order to support prices amid concerns over a global economic recovery.
Brent crude oil futures were up 11 cents, or 0.1%, at $85.92 a barrel by 0753 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 9 cents, or 0.1%, at $82.25 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, agreed to maintain production cuts for another month at their meeting on Sunday, despite strong demand for crude and worries that the pandemic might slow global economic recovery.
The panel also said it will need to boost compliance with the cuts in order to further support prices.
“It’s been a fairly positive start to the week in terms of oil prices,” said Stephen Innes, chief global market strategist at AxiCorp. “The market seems to be pricing in the view that the oil market is in a fairly good place as the demand outlook improves.”
Oil prices have been supported in recent weeks by expectations of a recovery in fuel demand as countries ease coronavirus-related restrictions.
Analysts say oil markets, however, are likely to remain fragile in the near term amid signs of a weakening economic recovery in some countries and concerns over renewed lockdowns.
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