Oil companies count on OPEC+ to talk production cuts to halt falling prices

Oil companies count on OPEC+ to talk production cuts to halt falling prices
Oil companies count on OPEC+ to talk production cuts to halt falling prices

Brent crude futures rose $1.20, or 1.3%, to $93.56 a barrel at 0117 GMT, while US West Texas Intermediate (WTI) crude futures rose $1.16, or 1.3%, to $87.77 a barrel.

Both benchmark contracts fell 3% to two-week lows in the previous session. Brent was heading for a weekly decline of nearly 8%, and WTI was headed for a decline of approximately 6% for the week.

The Organization of the Petroleum Exporting Countries and its allies, collectively called OPEC+, are set to meet on September 5 against a backdrop of falling prices and dwindling demand, even as top producer Saudi Arabia says supply remains tight.

ANZ commodities analyst Daniel Hynes said it may be a bridge too far for OPEC+ to agree to cut production, but top producer Saudi Arabia is likely to point to what it sees as a rift between current prices and tight supply to raw materials.

“They will certainly try to talk up the market as much as possible to better reflect what they see as a tight market, which is exposed to further supply-side problems,” he said.

OPEC+ lowered its demand forecast this week, now forecasting demand to fall 400,000 barrels per day (bpd) behind supply in 2022, but expects a market deficit of 300,000 bpd in its base case by 2023.

“As Brent prices fall towards $90/bbl, the likelihood of an OPEC+ supply response at Monday’s or October’s meeting increases,” said National Australia Bank commodities analyst Baden Moore.

“We expect any reduction in OPEC+ supply to have a material effect on oil prices, given very low inventory levels worldwide, the limited capacity of supply alternatives and the ongoing energy crisis in Europe,” Moore said.

In the short term, investors are concerned about the fallout from the latest COVID-19 restrictions in China, where the city of Chengdu was the latest on Thursday to order a lockdown that has hit manufacturers like Volvo.

It came on the same day that data showed Chinese factory activity contracted for the first time in three months in August due to dwindling demand, while power shortages and COVID-19 outbreaks disrupted production.

The article is in Dutch

Tags: Oil companies count OPEC talk production cuts halt falling prices

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