Oil Jumps 3% as OPEC Cuts Output by 100,000bdp

By Adedapo Adesanya

The average price of crude oil grades rose about 3 per cent on Monday, as members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed to a small production cut of 100,000 barrels per day to bolster prices.

Brent crude futures gained $2.72 or 2.92 per cent to sell at $95.74 a barrel, while the United States West Texas Intermediate (WTI) crude rose by $2.26 or 2.6 per cent to $89.13 per barrel.

The OPEC+ meeting on Monday endorsed a decision to cut the collective oil production target by 100,000bpd for October, despite Russia reportedly resisting such a move.

The energy ministers of the OPEC+ production pact agreed to return the targeted production levels to the August quotas, saying that last month’s increase was intended only for September.

While several OPEC members have signalled support for such a move, including Saudi Arabia, Russia is not among them, according to reports. The reason, they said, was that a supply cut might diminish its sway over large Asian oil buyers as it would be a signal there is more oil in the world than there is demand for.

According to the Wall Street Journal sources, Russia voiced its objections to a production cut last week at a preliminary meeting, where OPEC+ set as its baseline scenario an oil market supply surplus of 900,000 barrels per day for this year and next.

The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ oil producer group had supported during an earlier meeting the 100,000 barrels per day cut.

The small cut is actually quite irrelevant considering that OPEC+ is estimated to be some 2.9 million barrels per day behind collective quotas.

Analysts, who had not expected the agreement even after Saudi Arabia had said it wanted to shore up prices, said the cut was mostly symbolic given that OPEC+ has been unable to meet its production targets.

OPEC+, however, decided that it could call a meeting at any time to discuss other actions. The meeting, OPEC said, decided to “Request the Chairman to consider calling for an OPEC and non-OPEC Ministerial Meeting anytime to address market developments, if necessary.”

OPEC’s next regular monthly meeting is scheduled for October 5.

Prices also gained support as the European Union’s foreign policy chief said he was less hopeful about reaching an agreement soon to revive a nuclear deal with Iran, which would delay any return of around 1 million barrels per day of Iranian crude to the market.