Oil rises as OPEC+ opts for modest output hike
Brent crude settled up 52 cents, or 0.79%, to $66.02 a barrel
Oil prices settled higher on Monday, recovering some of last week’s losses, after producer group OPEC+ opted for a modest output hike and investors priced in the possibility of more sanctions on Russian crude.
OPEC+ flagged plans to further raise production from October.
The market had run ahead of itself in regard to this OPEC+ increase, said Ole Hansen, head of commodity strategy at Saxo Bank. Today we’re seeing a classic sell the rumour, buy the fact reaction.
Brent crude settled up 52 cents, or 0.79%, to $66.02 a barrel.
The benchmark had risen more than $1 earlier in Monday’s session.
OPEC+, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, agreed on Sunday to further raise oil production from October.
Saudi Arabia, the world’s top oil exporter, cut the official selling price for the Arab Light crude it sells to Asia a day after OPEC+ producers agreed the output hike.
Riyadh and its allies signalled a decisive pivot: defending market share now outweighs defending prices, Rystad Energy Chief Economist Claudio Galimberti said in a note on Monday.
By allowing supply back into a market moving toward surplus, OPEC+ is playing offense, not defence. Traders have been put on notice, he added.
OPEC+ has been raising production since April after years of cuts aimed at supporting the oil market. The latest decision comes despite a likely looming oil glut in the Northern Hemisphere winter months.
The eight members of OPEC+ will lift production from October by 137,000 barrels per day. That, however, is much lower than increases of around 555,000 bpd for September and August and 411,000 bpd in July and June.
The impact of the latest increase is expected to be relatively low, because some members have been over-producing. So, the higher output level would likely include barrels that are already in the market, analysts said.
OPEC on Monday released a compensation schedule from six of its members covering the period from last month and until June next year to make up for producing above their targets.
The schedule indicates that in total the members need to deliver monthly cuts ranging from 190,000 bpd to 829,000 bpd to comply with output targets.