By Myra P. Saefong and Jamie Chisholm
WTI Crude Prices Gain Over 5% To Set Near 2-Week High
Oil prices rose sharply on Monday, with U.S. benchmark prices standing more than 5%, following reports that the OPEC+ cartel is considering a production cut of more than a million pounds. barrels per day.
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“Renewed interest in oil was sparked by news reports over the weekend speculating on the potential for a significant production cut of a million barrels per day or more at the meeting of OPEC+ on Wednesday, to support the market at a time of falling demand due to the booming global economy,” Colin Cieszynski, chief market strategist at SIA Wealth Management, said in a daily report.
The price of Brent crude, the global benchmark, hit $130 a barrel following Russia’s invasion of Ukraine in February, when Western sanctions against Moscow sparked supply concerns.
However, prices have steadily fallen, as these concerns have been overshadowed by the prospect of a slowdown in demand if the central bank’s policy of raising interest rates to fight inflation causes a contraction in the Mondial economy.
This week’s OPEC+ meeting will be the first face-to-face meeting at the group’s headquarters in Vienna since the pandemic, adding to expectations that a significant policy shift needs to be debated.
Read: OPEC+ could cut oil production as it tries to stop a strong crude sell-off
A cut in production “would reinforce the message from Saudi Arabia and other key producers that they are prepared to take action to prevent further price declines”, said Robbie Fraser, global head of research and analysis at Schneider Electric, in a daily report.
A cut could also be met with dismay by the West’s net energy importers, as it could not only add to inflationary pressures, but would lead to higher prices to help prop up Russia, which is scrambling for revenue. to pay for his invasion of Ukraine.
See also: Why California pays almost 70% more for gasoline at the pump than the rest of the country
Stephen Innes, managing partner at SPI Asset Management, noted that concerns over reduced demand in the coming months were evident in the markets, where the cost of oil futures was lower in contracts for oil. next year.
“The strong dollar and weak demand in China and Europe pose significant headwinds, driving a further decline in futures spreads since mid-August and still signaling pessimism around the global economic outlook. A lukewarm response from futures to a cut in output would ring with the negative message that falling US inflation breakevens and industrial metal prices send,” Innes said.
Read also: Europe faces ‘unprecedented risk’ of gas shortage, warns IEA
-Myra P. Saefong
(END) Dow Jones Newswire
10-03-22 1511ET
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