Oil Dips Despite OPEC+ Output Cut Possibility

By Adedapo Adesanya

Oil dipped despite strong indications that the Organisation and the Petroleum Exporting Countries and allies (OPEC+) will agree to cut crude output when it meets on October 5.

Brent crude fell 53 cents or 0.6 per cent to $87.96 a barrel as the US West Texas Intermediate (WTI) crude futures fell $1.74 or 2.1 per cent to $79.49.

Members of the OPEC+ alliance meeting next week are discussing the possibility of agreeing to an oil production cut, narrowing the range of options to between 500,000 barrels per day and 1 million barrels per day, according to sources.

Major OPEC+ producers have already initiated discussions on a potential cut in their collective oil production quota to support the market, which has been dragged down by fears of a recession in recent weeks.

“Maybe during the weekend or Monday, it will be more clear. Usually, the consultations conclude just before the meeting date,” one source at OPEC+ cited by Reuters said.

OPEC+ meets on Wednesday, October 5, to discuss the market and fundamentals situation as oil prices have fallen below $90 per barrel, a level last seen just before the Russian invasion of Ukraine.

It is “likely” that the group will agree on a cut, another source at OPEC told Reuters.

At the previous meeting, OPEC+ reversed the 100,000-barrels-per-day increase for September and returned the October quota to the levels from August.

Brent and WTI gained 2 per cent and 1 per cent week-on-week, respectively, marking the first weekly rise since August and following nine-month lows hit this week.

While the US Dollar has dropped from 20-year highs earlier in the week, it gained through the day. A stronger greenback makes dollar-denominated oil more expensive for buyers holding other currencies, reducing demand for the commodity.

Analysts also expect buying to improve as Russia prepares to annex four Ukrainian regions to Russia on Friday, forcing Western nations to strengthen sanctions against Russia.

European Union countries agreed on what would be the bloc’s eighth round of sanctions against Russia for waging war against Ukraine.