Oil jumps more than $4 as OPEC+ weighs biggest production cut since 2020

Oil jumps more than $4 as OPEC+ weighs biggest production cut since 2020
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  • OPEC+ is considering a cut of more than 1 million bpd, sources say
  • Interest rates and strong dollar weigh on markets
  • EU ban on Russian oil trade threatened

LONDON (Reuters) – Oil prices rose more than $4 on Monday as OPEC+ considers cutting production by more than 1 million barrels per day (bpd) in a bid to bring prices down with the biggest cut since the start of the COVID-19 19 Pandemic to support.

Brent crude futures were up $4.38, or 5.1%, at $89.52 a barrel by 9:50 a.m. EDT (1350 GMT). US West Texas Intermediate crude was up $4.79, or 6%, at $84.28.

Oil prices have fallen for four straight months since June as COVID-19 lockdowns in the biggest energy consumer China hurt demand, while rising interest rates and a strengthening US dollar weighed on global financial markets.

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To prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are considering a production cut of more than 1 million barrels a day ahead of Wednesday’s meeting, OPEC+ sources told Reuters.

This number does not include additional voluntary cuts from individual members, added an OPEC source.

If agreed, this will be the group’s second consecutive monthly cut after reducing production by 100,000 bpd last month.

“After a year of tolerating extremely high prices, missed targets and extremely tight markets, the Alliance (OPEC+) does not appear hesitating to act quickly to support prices amid a deteriorating economic outlook.”

OPEC+ missed its production targets by nearly 3 million bpd in July, two grower group sources said, as sanctions on some members and low investment from others hampered their ability to ramp up production.

While prompt Brent prices could continue to rise in the near term, concerns over a global recession are likely to limit upside potential, consultancy FGE said.

“Should OPEC+ decide to cut production in the short term, the resulting increase in OPEC+ spare capacity is likely to put more downward pressure on long-term prices,” a statement said on Friday.

The dollar index fell for the fourth straight day Monday after hitting its highest level in two decades. A cheaper dollar could boost oil demand and support prices.

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Reporting by Noah Browning Additional reporting by Florence Tan and Muyu Xu Editing by David Goodman and Paul Simao

Our standards: The Thomson Reuters Trust Policy.

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