Oil rose about 1 per cent on Wednesday, as OPEC+ agreed to its deepest cuts to production since the 2020 Covid pandemic, despite a tight market and opposition to cuts from the US and others. Prices also rose on US government data that showed crude and fuel inventories fell last week.
Brent crude rose 93 cents, or 1 per cent, to $92.73 a barrel, while US West Texas Intermediate (WTI) crude rose 68 cents, or 0.8 per cent, to $87.20 a barrel. Both contracts rose sharply in the last two days.
The 2 million-barrel-per-day (bpd) cut from OPEC+ could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar.
Oil had been rising this week in anticipation of the cuts, said Fiona Cincotta, senior financial markets analyst at City Index.
“The real impact of a large cut would be smaller, given that some of the members are failing to reach their output quotas,” Cincotta added.
In August, OPEC+ missed its production target by 3.58 million bpd as several countries were already pumping well below their existing quotas.
“We believe new output targets will mostly be shouldered by core West Asian countries, led by Saudi Arabia, the UAE and Kuwait,” said Rystad Energy’s analyst Jorge Leon.
The US was pressing OPEC+ producers to avoid making deep cuts, a source familiar with the matter told Reuters, as President Joe Biden looks to prevent a rise in US gasoline prices ahead of midterm congressional elections on November 8.
Biden has been grappling with higher gasoline prices all year, which have eased after a spike, something his administration has touted as a major accomplishment.