Oil prices soars over 2% amid focus on OPEC+, Brent crude at $81.86
Crude oil prices surged more than 2%, driven by speculation that OPEC+ might prolong or deepen production cuts, a reduction in Kazakh oil output due to a storm, and a softer U.S. dollar, on Tuesday, according to a Reuters report.
Brent crude futures recorded a $1.88 increase, which is a 2.4% rise, reaching $81.86 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude saw a $1.84 uptick, reflecting a 2.5% gain, reaching $76.70.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are scheduled to conduct an online ministerial meeting on Thursday to deliberate on 2024 production targets.
Negotiations are expected to be challenging, and there’s a likelihood of maintaining the existing agreement rather than implementing more substantial production reductions, as indicated by four sources within OPEC+.
Last week, the market experienced a decline after OPEC+ delayed its scheduled meeting to address discrepancies in production targets for African producers.
“Even with the disagreement, the possibility of keeping the deal as is for another month remains high,” Phil Flynn, an analyst at Price Futures Group in Chicago, was quoted as saying by Reuters.
The United Arab Emirates is expected to resist this, as it pushed for an increase in its 2024 production target during the previous OPEC+ meeting in early June.
Support for oil prices also stemmed from a weakening dollar, anticipated U.S. crude inventory decline, and a reduction in Kazakh oil output. Kazakhstan’s major oilfields have collectively reduced daily oil production by 56%.
Four analysts surveyed by Reuters project that the upcoming weekly U.S. supply reports will indicate a decrease of around 2 million barrels in crude inventories. The American Petroleum Institute is set to release the first of this week’s two reports at 2130 GMT.
On Tuesday, the U.S. dollar dropped to a three-month low after U.S. Federal Reserve Governor Christopher Waller suggested the potential for lowering the Fed policy rate in the coming months if inflation continues to decline. A weaker dollar typically boosts oil demand, making dollar-denominated oil more affordable for buyers using other currencies.
In the Middle East, Israeli forces and Hamas fighters maintained a ceasefire beyond the initial deadline, extended by at least two days to facilitate the release of more hostages.
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Updated: 28 Nov 2023, 10:40 PM IST
