Oil rose more than 5% in its biggest rise since July, as potential production cuts led by an alliance “OPEC+” To heighten fears of tight supplies in the future.
West Texas Intermediate crude rose to nearly $84 a barrel, following news that the Organization of the Petroleum Exporting Countries (OPEC) and its allies may cut production by more than one million barrels per day, its biggest drop since the pandemic. No final decision will be made until ministers meet in Vienna on Wednesday.
“It’s surprising that the market is getting OPEC to talk regarding 1 million barrels per day cuts with stocks still tightening and the fact that they are also missing their production targets,” said Rob Haworth, chief investment analyst at US Wealth Management. “But with that, prices are now down from over $120 to $80, so I’m sure they look at that as a challenge,” he added.
Consider that with a possible recession and low seasonal demand as winter approaches “there is no scenario Good on the horizon, so the cuts themselves make sense given how the data lines up.”
Read also: “OPEC +” discusses reducing oil production at its meeting next week
Oil fell by a quarter in the three months to last September, as the global economic slowdown sapped demand. Banks, including UBS Group AG and JPMorgan Chase & Co, said that OPEC and its allies may need to cut production by at least 500,000 barrels per day to achieve Price stability. Goldman Sachs said a cut of more than 1 million barrels per day might bring investors back into the market.