OPEC+ production hike report knocks oil prices to 10-month low

LONDON: On Monday, oil prices fell to their lowest level since early January after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are discussing increasing supply.

Brent crude futures for January were down $4.07, or 4.7%, to $83.55 per barrel.

US West Texas Intermediate (WTI) crude futures for December were down $4.02, or 5%, to $76.06 before the contract expiration later on Monday. The more actively traded January contract fell $3.82, or 4.8%, to $76.29 per share.

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The Wall Street Journal stated that an increase of up to 500,000 barrels per day (BPD) would be considered at the OPEC+ meeting on December 4.

Reuters was unable to confirm the report quickly.

The Organisation of Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, recently lowered their production objectives. This month, Saudi Arabia’s energy minister indicated that the organization would continue to be cautious.

Meanwhile, supply problems have largely subsided, while concerns over Chinese fuel demand and the strength of the US dollar have pushed on prices.

The dollar has strengthened due to expectations of future interest rate hikes, making dollar-denominated commodities more expensive for investors.

“In addition to the reduced demand forecast owing to China’s COVID limitations, today’s rally in the US currency is also unfavorable for oil prices,” said Tina Teng, an analyst at CMC Markets.

“Risk sentiment becomes fragile since all recent economic statistics from key nations point to a recessionary scenario, particularly in the UK and eurozone,” she said, adding that last week’s hawkish statements from the US Federal Reserve have also stoked fears about the US economic future.

The number of new COVID cases in China remained close to April’s peaks as the country battled national outbreaks.

Last week, the front-month Brent crude futures spread reduced significantly, while the front-month WTI crude futures spread moved into contango, signaling diminishing supply concerns.