Oil prices jump more than 3% ahead of OPEC+ meeting on supply cuts

Crude oil rose nearly $3 a barrel on Tuesday, on expectations of a big cut in output from the OPEC+ group of countries and as a weaker dollar made buying the commodity less expensive.

Brent crude closed at $91.80 a barrel, up $2.94, or 3.3%. US WTI closed up $2.89, or 3.5%, from $86.52 a barrel.

The Organization of Petroleum Exporting Countries and its allies, OPEC+, are expected to cut production when they meet this Wednesday (5). The move would reduce supply in an oil market that energy company executives and analysts say is already tight due to healthy demand, lack of investment and supply problems.

Group sources say OPEC+, which includes Russia, is discussing production cuts of more than 1 million barrels per day (bpd). Oil extended gains after Bloomberg reported that OPEC+ was considering a 2 million bpd cut.

“We expect a substantial cut to be made, which will not only help tighten physical fundamentals, but will send an important signal to the market,” Fitch Solutions said in a note.

production target

OPEC+ has ramped up production this year after record cuts implemented in 2020, when the pandemic reduced demand.

In recent months, the group has failed to deliver on its planned production increases, failing to reach 3.6 million bpd in August.

The production target cut being considered is justified by the sharp drop in oil prices from recent highs, Goldman Sachs said, adding that it reinforced its bullish outlook on the commodity.

Also boosting oil prices, the dollar was on track for a fifth daily loss against a basket of currencies as investors speculated that the US Federal Reserve could slow its interest rate hikes.

(Reporting by Laila Kearney; with additional reporting by Bozorgmehr Sharafedin in London and Isabel Kua in Singapore)