By Colleen Howe
Oil Prices Surge Over $1 as OPEC+ Delays Output Hike Amid Soft Demand
BEIJING (Reuters) – In early trading on Monday, oil prices spiked by more than $1 after OPEC+ announced a one-month delay to their planned December output increase, citing soft demand and rising supply outside the group.
Crude oil futures climbed by $1.18 per barrel, or 1.61%, to reach $74.28 for Brent crude and $1.20 per barrel, or 1.73%, to hit $70.69 for U.S. West Texas Intermediate (WTI) crude by 0121 GMT.
OPEC+, which consists of the Organization of the Petroleum Exporting Countries along with Russia and other allies, was set to raise output by 180,000 barrels per day (bpd) starting in December. However, the group has decided to extend their current 2.2 million bpd production cut for an additional month due to market conditions.
Analysts from ING noted, "While the delay until January does not change fundamentals significantly, it does potentially leave the market having to rethink the strategy of OPEC+." This unexpected move by OPEC+ surprised some market participants who were anticipating the planned output increase to proceed as scheduled.
The group plans to gradually ease the 2.2 million bpd cut in the upcoming months, while 3.66 million bpd of production cuts will remain in place until the end of 2025.
Both Brent and WTI saw weekly declines of around 4% and 3%, respectively, last week attributed to record U.S. output. However, prices rose slightly on Friday following reports of potential geopolitical tensions between Iran and Israel.
Looking ahead, markets are closely watching the U.S. presidential election on Tuesday and expecting a 25 basis points interest rate cut from the U.S. Federal Reserve on Thursday. Additionally, in China, the Standing Committee of the National People’s Congress is meeting from Nov. 4-8 to discuss additional stimulus measures to support the slowing economy.
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Analysis:
Oil prices surged over $1 as OPEC+ decided to delay its planned output hike due to soft demand and increasing supply outside the group. This unexpected move may impact the global oil market dynamics and potentially influence prices in the coming months. Investors should closely monitor developments within OPEC+ and geopolitical tensions to make informed decisions regarding their investments in the oil sector. Additionally, upcoming events such as the U.S. presidential election and interest rate decisions could also have implications on the financial markets, requiring investors to stay vigilant and adapt their strategies accordingly.