Oil Steadies After Rally as Market Counts Down to OPEC+ Meeting

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(Bloomberg) — Oil steadied after its biggest one-day gain since May as the market looked to OPEC+ to meet expectations of a major supply cut.

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West Texas Intermediate traded above $83 a barrel after rallying more than 5% on Monday. The Organization of the Petroleum Exporting Countries and its allies, including Russia, will consider cutting output by more than 1 million barrels a day when they meet on Wednesday, delegates said.

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Oil fell 25% last quarter as central banks, including the Federal Reserve, raised rates aggressively to combat runaway inflation. The shift to tighter monetary policy spurred speculation of a sharp slowdown in global growth, hurting demand for commodities that were also hit by the rising dollar.

The OPEC+ meeting in Vienna will be the group’s first face-to-face meeting since the pandemic forced the group online. Ministers also plan to hold a press conference after their session, the first such briefing since last year.

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Goldman Sachs Group Inc. said a potential cut in the alliance “would come amid one of the tightest markets in history,” according to an Oct. 3 note titled “OPEC Takes on the Fed.” Still, that decision could be justified by the recent big drop in crude oil prices, he said.

A move by OPEC+ to cut output would be a setback for US President Joe Biden, who has urged the group to add barrels to counter inflation ahead of next month’s midterm elections. It also suggests that efforts to isolate Moscow over its invasion of Ukraine are not working as well as the administration would like.

The prospect of lower alliance supply has helped widen the market’s main distribution periods, indicating an expectation of tighter conditions. WTI’s flash spread, the difference between its two closest contracts, was 92 cents a barrel in retreat, up from 35 cents two weeks ago.

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