Oil Creeps Higher Ahead of Potential OPEC+ Supply Cut

© Reuters.

By Ambar Warrick

AiVIF.com-- Oil prices rose on Monday, recovering some ground after bruising losses last week as investors awaited details on potential OPEC production cuts from a meeting later in the day.

London-traded Brent oil futures rose 1.4% to $94.59 a barrel, while U.S. West Texas Intermediate futures rose 1.6% to $88.30 a barrel by  20:08 ET (00:08 ET). 

Crude prices slumped between $6 to $8 over the past week as growing concerns over a global economic recession severely crimped the outlook for crude demand. Traders are fearing an extended economic slowdown in the United States as the Federal Reserve embarks on a monetary tightening cycle.

Reports that the U.S. and Iran are nearing a revival of the nuclear deal also dented crude prices with the prospect of a supply glut. Washington on Friday signaled that it was keen on striking a deal with Tehran, given that the U.S. is struggling with elevated inflation due to high fuel prices.

Focus now turns to the Organization of Petroleum Exporting Countries and its allies (OPEC+), which will convene later in the day to decide on whether to cut supply. The cartel had earlier signaled that it would reduce production to support prices, even with several of its members producing below daily quotas. 

But reports suggest that the cartel will likely keep production unchanged or implement a small supply cut. Despite concerns over slowing crude demand, supply conditions appear to be tight, particularly with Russia planning to scale back crude exports.

Moscow also shut off gas supplies to Europe, a move that could exacerbate a brewing energy crisis in the euro zone and support demand for oil.

Last week, a bigger-than-expected draw in U.S. crude inventories suggested that gasoline demand in the world’s largest economy was improving after a lull through the bulk of the year.

But concerns over an economic slowdown in China, the world’s largest crude importer, weighed on the outlook for crude demand. COVID-19 lockdowns and a recent energy shortage ground Chinese economic activity to a halt this year.