Oil price rises as Opec+ has begun talks on output cut

Leading Opec+ members have begun discussions about an oil output cut at the group’s next meeting on October 5, three sources told Reuters.

One Opec source told Reuters a cut was “likely”, while two other Opec+ sources said key members had spoken about the topic.

A source familiar with Russian thinking told Reuters earlier this week that Moscow could suggest a cut of up to one million barrels per day (bpd).

The latest comments suggest that key Opec members have started communicating over the matter, although the volume of any potential cut is still unclear.

Next week’s meeting takes place against a backdrop of falling oil prices from multi-year highs hit in March, and severe market volatility.

Opec+, which combines Opec countries and allies such as Russia, agreed a small oil output cut of 100,000 barrels a day at its September meeting to bolster prices.

Top Opec producer Saudi Arabia flagged in August the possibility of output cuts to address market volatility.

Meanwhile, oil prices firmed on Thursday, erasing earlier losses, on indications that Opec+ might cut output, though a stronger dollar and weak economic outlook kept a lid on gains.

Brent crude futures rose 52 cents, or 0.6 per cent, to $89.84 a barrel by 1027GMT and US crude futures rose by 52 cents, or 0.6 per cent, to $82.67.

Leading members of Opec+ have begun discussions about an oil output cut when they meet on October 5, two sources from the producer group told Reuters.

One source from the Organisation of the Petroleum Exporting Countries (Opec) said a cut looks likely but gave no indication of volumes.

Reuters reported this week that Russia is likely to propose that Opec+ reduces oil output by about 1 million barrels per day (bpd).

Hurricane Ian also provided price support. About 157,706bpd of oil production was shut down in the Gulf of Mexico as of Wednesday, according to the Bureau of Safety and Environmental Enforcement.

Both crude benchmarks had rebounded in the previous two sessions from nine-month lows earlier in the week, buoyed by a temporary dive in the dollar index and a larger than expected US fuel inventory drawdown.

However, the dollar index rose again on Thursday, dampening investor risk appetite and stoking fears recession fears, sending both crude contracts lower earlier in the session.

The Bank of England said it is committed to buying as many long-dated government bonds as needed between Wednesday and October 14 to stabilise its currency after the British government’s budget plans announced last week sent sterling tumbling.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, citing expectations of weaker demand and a stronger US dollar, but said global supply disappointments reinforced its long-term bullish outlook.

In China, the world’s biggest crude oil importer, travel during the forthcoming week-long national holiday is set to hit its lowest level in years as Beijing’s zero-Covid rules keep people at home while economic woes curb spending.

Citi economists have lowered their China GDP forecast for the fourth quarter to 4.6 per cent growth year on year from five per cent expected previously.

“Stringent zero-COVID measures and a weak property sector continue to cloud growth prospects,” Citi analysts wrote on Wednesday. — Reuters