Oil prices surge after OPEC cut and Russian supply warning
Oil held a three-day rally after the OPEC+ alliance agreed to the biggest production cut since 2020 and Russia reiterated a warning that it won’t sell crude to any countries that adopt a price cap.
West Texas Intermediate traded near $88 (€89) a barrel after jumping 10% over the previous three sessions. OPEC+ plans to slash daily output by 2 million barrels, a move that drew a swift rebuke from the US. The Biden administration has previously sought more oil from producers as it battles energy-driven inflation.
Goldman Sachs Group Inc. raised its fourth quarter price forecast for Brent oil to $110 (€111) a barrel after the OPEC+ action and said the reduction could prompt the International Energy Agency to coordinate a release of reserves. Crude prices have trended lower since June on concerns over a global slowdown.
“All the developments we have seen on the supply side at this point very much sets the stage for what we believe will be higher prices into the end of this year,” Damien Courvalin, the head of energy research at Goldman Sachs, said in a Bloomberg television interview. “With this cut and the winter seasonal demand, inventories will continue to fall.”
Saudi Arabia’s energy minister said the real-world impact of the cuts will likely be around 1 million to 1.1 million barrels a day from November given some alliance members are already pumping well below their quotas. That still equates to the biggest reduction since the start of the pandemic.
Speaking after the OPEC+ announcement, Russian Deputy Prime Minister Alexander Novak said moves to cap the price of his country’s oil will backfire and could lead to a temporary reduction in its output.
The European Union on Wednesday approved a fresh package of sanctions on Moscow that includes the US-led measure to put a price limit on Russian oil.
US crude, gasoline and distillate stockpiles all declined last week, according to the Energy Information Administration, adding to a tightening supply outlook. Motor fuel inventories tumbled by 4.73 million barrels to the lowest level since November 2014.
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