Oil held onto three days of gains after the OPEC+ alliance agreed to the biggest production cut since 2020 and Russia warned that a proposed oil price cap could lead to an output hit in Russia.
West Texas Intermediate traded near US$88 a barrel after jumping 10 per cent over the previous three sessions. The Organization of Petroleum Exporting Countries and its allies plans to slash daily output by two million barrels -- though in reality supplies will be cut by a smaller amount -- a move that drew a swift rebuke from the U.S. The Biden administration has previously sought more oil from producers as it battles energy-driven inflation.
“Notwithstanding demand concerns, the combined impact of OPEC+’s production cut and the EU embargo in Russia’s production suggests a tighter oil market ahead,” Morgan Stanley analysts including Martijn Rats wrote in a report. “With our tighter balances, we suspect that Brent will find its way to US$100 a barrel quicker than we estimated before.”
Speaking after the OPEC+ announcement, Russian Deputy Prime Minister Alexander Novak said moves to cap the price of his country’s oil will backfire and could lead to a temporary reduction in its output. The European Union on Wednesday approved a fresh package of sanctions on Moscow that includes the U.S.-led measure to put a price limit on Russian oil.Brent for December settlement edged up to US$93.39 a barrel.
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