Oil prices rose after OPEC+ signaled that it would pause output increases next quarter, following a modest hike for next month.
Brent for January rose above US$65 a barrel, while West Texas Intermediate was near US$61.
OPEC and allies on Sunday said they would raise output by 137,000 barrels a day next month, matching expectations. The group then takes a three month hiatus from January to March.
Photo: Reuters
Global benchmark Brent has slumped about 10 percent over the past three months, as the market faces the prospect of ballooning oversupply. Still, prices recently bounced from a five-month low after tighter US sanctions on Russian producers raised some questions about supply prospects from that nation.
The OPEC+ output decision and planned pause are “an acknowledgment from the group that the market is facing a sizeable surplus next year,” ING Groep NV head of commodities strategy Warren Patterson said in Singapore.
There is plenty of uncertainty concerning the scale of oversupply, and it is unclear how disruptive the latest sanctions on Russia are going to be, he added.
The eight key members of OPEC+ are left with about 1.2 million barrels a day of their current supply tranche still to restore. Actual output increases have fallen short of advertised volumes, as some members offset earlier overproduction and others struggle to pump more.
Following the OPEC+ move, Morgan Stanley raised its near-term price forecast for Brent, while maintaining a warning for a “substantial surplus.” The United Arab Emirates yesterday added to the chorus of producers who have come out to downplay glut concerns.
Traders are monitoring disruptions to flows, after a Ukrainian drone attack in the Black Sea left a tanker ablaze and damaged loading facilities in the port city of Tuapse, Russia. The area is home to a refinery run by PJSC Rosneft Oil Co, which was sanctioned last month by the US, along with PJSC Lukoil Oil Co.
US President Donald Trump threatened possible US military action against militants in Nigeria, Africa’s largest oil producer, if the country’s government does not halt the groups’ “killing of Christians.” He hinted at an immediate cutoff in aid to the OPEC member.
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