Oil rises in price after OPEC’s unexpected decision
9 September 08:44
Oil prices rose on Tuesday after OPEC decided to increase production by less than market participants expected. Concerns about supply cuts due to potential new sanctions against Russia also kept prices from falling, "Komersant Ukrainian" reports citing Reuters.
Brent crude rose by 35 cents, or 0.53%, to $66.37 per barrel as of 05:35 Kyiv time, while US West Texas Intermediate rose by 32 cents, or 0.51%, to $62.58 per barrel.
Unexpected U-turn from OPEC
Eight OPEC members agreed on Sunday to increase production by 137,000 barrels per day from October. This is significantly less than the monthly increases of about 555,000 barrels per day in September and August, and 411,000 barrels per day in July and June. It is also less than some analysts had expected.
“This marks a reversal of cuts that were to remain in place until the end of 2026, following the rapid return of the previous share of idle barrels in recent months,”
– daniel Hines, senior commodity strategist at ANZ, said in a client note on Tuesday.
Overall, given the faster increase in OPEC production this year and demand that again fell short of expectations at the beginning of the year, the oversupply of crude oil on the market remains a major price driver, Haitong Securities said.
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Will there be sanctions against Russia?
Prices were also supported by speculation about new sanctions against Russia following the air attack on Ukraine that caused a fire in a government building in Kyiv. US President Donald Trump said he was ready to move to the second phase of restrictions.
The European Union’s top sanctions official was in Washington with a team of experts to discuss what would be the first coordinated transatlantic measures against Russia since Trump took office.
Further sanctions against Russia would reduce its oil supply to world markets, which could support higher oil prices.
Demand in the US may increase
The Federal Reserve’s Federal Open Market Committee meets next week, and traders see an 89.4% chance of a quarter-point interest rate cut.
Lower rates reduce the cost of consumer borrowing and could boost economic growth and oil demand.
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