Oil prices soared over 3% on Monday morning in Asian trade after reports indicated the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are likely to consider an output cut of over a million barrels per day in the fresh trading week.
Brent crude futures jumped 3.3% to $87.96 a barrel before settling at $87.22/bbl. U.S. West Texas Intermediate futures also soared over 3% in morning trade and was last seen at $81.41/bbl.
If the alliance decides to trim its output when it meets in Vienna on Wednesday, it will be the second consecutive monthly reduction. OPEC+ had reduced its output by 100,000 barrels per day in September.
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Softening Prices: Oil prices have been falling over the last four months, dragged by fears of a global recession after central banks worldwide tightened their policy rates aggressively to rein in inflation. From its peak at over $112 per barrel in May this year, the WTI spot has fallen over 27% so far.
The price slide has spilled over to some ETF performances. The United States Brent Oil Fund BNO lost over 6% last month, while the Vanguard Energy Index Fund ETF VDE shed over 9% in the same period.
If OPEC+ decides to go ahead with the cut, it would be against the interests of the Biden administration, which has been calling for increased oil output to rein in inflation and limit Russia’s revenues from the commodity.
Expert Take: According to a Reuters report, ANZ analysts stated in a note that anything less than 500,000 barrels/day would be shrugged off by the market.
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