Oil prices jumped some 5% on Monday, two days ahead of a face-to-face Opec+ meeting, suggesting a more drastic production cut.
Around 12:45 GMT (14:45 in Paris), the barrel of Brent North Sea for delivery in December, which is the first day as a reference contract, took 4.31% to 88.81 dollars.
A barrel of U.S. West Texas Intermediate (WTI) for delivery in the same month, gained 4.92% to 83.40 dollars, shortly after jumping more than 5%.
The Organization of the Petroleum Exporting Countries and their allies (Opec+), led by Russia, is “considering its largest production cut since the Covid-19 pandemic” to counter falling prices, says Victoria Scholar, an analyst at Interactive Investor.
Both oil benchmarks recorded heavy losses during the month of September (-8.8% for Brent and -11.2% for WTI), weighed down by the focus on growing fears of a recession in consumer countries.
The alliance announced on Saturday that its Wednesday meeting would be held face-to-face in Vienna, a first since March 2020 and the emergence of the pandemic, fueling rumors of substantial cuts in its production.
“Members of the group have already begun discussions on a reduction in production quotas that would be between 500,000 and one million barrels per day,” said Stephen Brennock of PVM Energy.
Victoria Scholar mentions “more than one million barrels per day to compensate for the recent declines” in prices.
The group’s decision is particularly scrutinized by the market. “A surprise could cause a significant move in the oil market, while if the group decides to act in line with expectations, we could see a further recovery” in prices, commented Walid Koudmani, analyst at XBT.
Already in September, faced with fears of recession, Opec+ had slightly lowered its target (by 100,000 barrels), for the first time in over a year, and said it was prepared to do more.
In addition, major central banks are scrambling to raise rates to contain inflation, “further clouding the near-term demand picture,” Brennock notes.
The strength of the dollar has also weighed on oil demand, analysts point out.
Since crude oil is traded in dollars, a strong greenback reduces the purchasing power of foreign investors using other currencies, and therefore demand.
