Oil surged at the start of the week as OPEC+ was set to consider a symbolic production cut and Europe’s energy crisis worsened dramatically.
(Bloomberg) — Oil surged at the start of the week as OPEC+ was set to consider a symbolic production cut and Europe’s energy crisis worsened dramatically.
West Texas Intermediate crude advanced toward $89 a barrel as European natural gas futures surged by as much as 35%. The Organization of Petroleum Exporting Countries and allies including Russia will meet later Monday to set supply levels for October, with the group discussing options including a 100,000 barrel-a-day output cut.
Crude fell sharply last week and generally has trended lower since June as the risk of a global economic slowdown hits markets. Last week, Russian energy giant Gazprom PJSC said gas flows along a key pipeline to Germany would not resume, just after G-7 ministers had endorsed a US-led initiative to cap the price of Russian oil.
The prospect of additional oil demand caused by the jump in natural gas prices is one element boosting crude, said Giovanni Staunovo, commodity analyst at UBS Group AG. “The other is some probably expecting some action from OPEC+ later today.”
The latest surge in European natural gas futures, which posted the biggest intraday jump since March, may be a double-edged sword for crude oil. While costlier gas can fan additional demand for crude-based fuels, the rally also threatens to plunge the region into a deep recession, denting overall consumption.
Oil’s advance came even as a Bloomberg gauge of the greenback rallied to an all-time high amid a broad shift away from risky assets, including equities, as investors assessed the fallout from Europe’s worsening energy crunch. Usually a costlier dollar is a headwind for commodities such as crude.
Ahead of the OPEC+ session — which falls on a US holiday that may thin trading — most market watchers said they expected no change to supply at this point despite the warning from Riyadh. JPMorgan Chase & Co. said output quotas would be rolled into October as summer surpluses would turn into deficits.
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