Oil settles above 4% ahead of OPEC+ supply cut

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Oil prices rose more than 4% on Monday, extending last week’s gain, as potential OPEC+ production cuts and the conflict in Libya helped offset a strong US dollar and dire outlook for American growth.

Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC) top producer, last week raised the possibility of production cuts, which sources said could coincide with an increase in the supply of the Iran if it makes a nuclear deal with the West.

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OPEC+, comprising OPEC, Russia and allied producers, meets to set policy on September 5.

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Brent crude settled down $4.10, or 4.1%, at $105.09 a barrel, after rising 4.4% last week. U.S. West Texas Intermediate (WTI) crude gained $3.95, or 4.2%, to $97.01, after rising 2.5% last week.

« Oil prices are rising gradually on hopes of a production cut from OPEC and its allies to restore market balance in response to the revival of the Iran nuclear deal, » Sugandha Sachdeva said. , Vice President of Commodity Research at Religare Broking.

International Energy Agency member countries could release more oil from strategic petroleum reserves (SPRs) if they deem it necessary when the current regime expires, the agency’s chief said on Monday.

The price of crude oil has surged this year, with Brent nearing a record high of $147 in March as Russia’s invasion of Ukraine exacerbated supply issues. Growing concerns about high interest rates, inflation and recession risks have since weighed on the market.

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Oil’s gain was limited by a strong U.S. dollar, which hit a 20-year high on Monday after the Federal Reserve chairman signaled that interest rates would be kept higher for longer to rein in inflation.

« While a strong dollar limits commodity prices, the undersupply issue in oil markets will likely continue to support the bullish bias, » said CMC Markets analyst Tina Teng.

Unrest in Libya’s capital over the weekend, killing 32, has raised fears the country could slide into full-scale conflict and disrupt the OPEC nation’s oil supply.

U.S. crude oil inventories likely fell by 600,000 barrels, with distillate and gasoline inventories also falling, a preliminary Reuters poll showed on Monday.

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The poll came ahead of reports from the American Petroleum Institute, an industry group, due Tuesday at 4:30 p.m. EDT (2030 GMT), and the Energy Information Administration, the statistical arm of the US Department of Energy, due at 10 a.m. 30:30 p.m. (2:30 p.m. GMT) Wednesday.

Crude stocks in U.S. emergency reserves fell 3.1 million barrels in the week of August 26 to the lowest since December 1984, according to Department of Energy data. (Additional reporting by Alex Lawler Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne Editing by David Goodman, Kirsten Donovan and David Gregorio)