Oil held a gain spurred by an OPEC+ decision to deliver a small supply cut as traders weighed the prospect of follow-up action from the group.
(Bloomberg) — Oil held a gain spurred by an OPEC+ decision to deliver a small supply cut as traders weighed the prospect of follow-up action from the group.
Global benchmark Brent traded above $95 a barrel after surging almost 3% on Monday as the Organization of Petroleum Exporting Countries and allies including Russia agreed to shave a modest 100,000 barrels a day off production quotas. After the surprise decision, Saudi Arabia said the group was willing to take additional action to support the global oil market if needed.
Crude has slumped since early June, erasing all of the gains made after Russia invaded Ukraine, as signs of a global slowdown and tighter monetary policy threatened to sap energy demand. A rise in the dollar also hurt prices. That decline prompted OPEC+ to pivot to removing barrels from the global market, switching tack from restoring the supply cuts imposed during the pandemic.
The move “signals a willingness to resume active market management to avert a major sell-off due to recession concerns or expectations of policy-driven supply increases,” RBC Capital Markets LLC analysts including Helima Croft said in a note. “They are seeking to put short-sellers on notice that they will not easily surrender the recent gains and go gently into the night.”
The first OPEC+ supply cut in more than a year showed the group is serious about managing crude markets and willing to take preemptive action, according to Saudi Arabia. “The simple tweak shows that we will be attentive, preemptive and pro-active,” Energy Minister Prince Abdulaziz bin Salman told Bloomberg.
Brent’s widely watched time spreads have been volatile in recent weeks, buffeted by expectation of what would be agreed by OPEC+ as well as Europe’s deepening energy crisis. The prompt spread — the difference between its two nearest contracts — was $1.26 a barrel, down from $1.47 a week ago.
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