Oil Prices Slide Over Saudi’s Comments on OPEC Output

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By Adedapo Adesanya

Oil prices dropped on Monday after conflicting reports emerged that the Organisation of the Petroleum Exporting Countries (OPEC) is not considering a half-million barrel daily output increase.

Brent crude futures fell by 77 cents or 0.9 per cent to $86.85 a barrel, as the United States West Texas Intermediate (WTI) crude futures slipped by 58 cents or 0.7 per cent to $79.50 per barrel.

Both benchmarks had plunged by more than $5 a barrel early due to the effect of the continued demand worry from China.

However, the market recovered after the Wall Street Journal reported that an increase of up to 500,000 barrels per day would be considered at the OPEC+ meeting on December 4.

However, prices retracted after Saudi Arabian energy minister, Prince Abdulaziz bin Salman, said the Kingdom was not discussing a potential oil output increase with other OPEC members.

“It is well-known that OPEC+ does not discuss any decisions ahead of the meeting,” he was quoted as saying.

Last month, OPEC+ unexpectedly decided to reduce output targets sharply. It would be unusual for the group to increase production at a time of declining prices and growing concern about the economic outlook.

He was also quoted as saying OPEC+ was ready to reduce output further if needed.

“The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023, and if there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene,” he said.

The market also came under pressure on possible increases to interest rates buoyed the greenback, making dollar-denominated commodities like crude more expensive for investors.

The US Dollar rose 0.9 per cent against the Japanese yen to 141.665 Yen, on pace for its largest one-day gain since October 14. The Euro fell 0.74 per cent against the greenback to $1.0248.

Fresh COVID-19 curbs in China fuelled worries over the global economic outlook and made traders shun riskier assets like oil.

China’s capital warned on Monday that it was facing its most severe test of the COVID-19 pandemic, shutting businesses and schools in hard-hit districts and tightening rules for entering the city as infections ticked higher in Beijing and nationally.

It recorded two deaths in Beijing, up from one on Saturday, which was China’s first since late May, while 26,824 new local cases were published for Sunday, nearing the country’s daily infection peak in April.

The new cases have cast doubt on hopes that the Chinese government could soon ease its tough restrictions on the world’s largest oil importer. This has boosted the Dollar, which is seen as a safe haven in times of stress.

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