Oil prices fell on Tuesday following the decision by OPEC+ to revise downwards its crude production targets for October. Gas continued to take off, still boosted by the halt in transit via the Nord Stream 1 gas pipeline linking Russia to Europe.
Around 8:10 a.m., a barrel of Brent from the North Sea for delivery in October yielded 0.59% to 95.177 dollars, after rising the previous evening to 95.35 dollars, a jump of 2.5%. The 159 liters of American West Texas Intermediate (WTI) for September delivery were trading at 88.718 dollars, down just 0.1%, after also gaining 2.5% on Monday evening.
The countries of the Organization of the Petroleum Exporting Countries and their allies (OPEC+) decided on Monday to reduce their production, a first since the drastic cuts made due to the Covid-19 pandemic and the collapse in demand.
If this decision should not have an impact on the overall balance of the market, it is “a symbolic gesture to show the market that the group will act to support prices if they seem to collapse”, explained to the AFP Matthew Holland, analyst at Energy Aspects. Experts agree that this slight drop in the alliance’s production targets is intended to provide a floor for crude prices.
“OPEC+ wants to defend oil prices above 90 dollars a barrel,” said Giovanni Staunovo, an analyst at UBS.
At the same time, the head of diplomacy of the European Union (EU), Josep Borrell, said Monday that he was “less confident” on a rapid conclusion of the negotiations to save the 2015 Iranian nuclear agreement, whose he is the coordinator. The hopes of revival of the agreement, and with them the lifting of part of the sanctions against Tehran leading to the return of Iranian oil to the market, had been revived last week, before being showered by the United States.
On the natural gas market, prices continued to climb, after the announcement of the complete shutdown of the Nord Stream 1 gas pipeline, which was to resume service on Saturday after maintenance. The Dutch TTF futures contract, the benchmark for the European market, traded at 245.93 euros per megawatt hour (MWh), soaring by nearly 15%. The current price surge is partly offsetting the previous week’s dip, with the weekly decline reaching 9.8%.
Nord Stream 1 will finally be ‘completely’ stopped until a turbine in this vital pipeline for supplying Europeans is repaired, Gazprom announced, citing the discovery of ‘oil leaks’ in the turbine during the maintenance operation. Not enough to justify, from a technical point of view, stopping the gas pipeline, according to the turbine manufacturer Siemens Energy.
With this new closure, “the European energy crisis has entered a new critical phase”, warns Susannah Streeter, analyst at Hargreaves Lansdown. ‘These are fears of the worst-case scenario that European leaders had been preparing for.’ For Pierre Veyret, analyst at ActivTrades, this new interruption of Russian deliveries via Nord Stream 1 comes “in retaliation” against the cap on the purchase price of Russian oil decided on Friday by the leaders of the G7 nations.
The Kremlin assured Monday that the stoppage of deliveries was the sole fault of the West, because their sanctions prevent the maintenance of gas infrastructure.
/ATS