Oil price increases to 3%; OPEC+ may cut output significantly
The largest output cut since the pandemic is underway.
Oil prices as of Monday have increased over 3% in Asian trade; OPEC+ considers slashing output by over 1 million barrels a day, a move supporting its most significant reduction since the COVID-19 pandemic.
Brent crude futures rebounded $2.51, or 3%, reaching $87.65 per barrel, just after a decrease on Friday by 0.6%.
West Texas Intermediate also increased to 3%, or $2.39, a barrel priced at $81.88 after losing 2.1% last session.
Since June, oil prices have decreased for four consecutive months. COVID-19 lockdowns in China, one of the world's top energy consumers, hurt demand. Increasing interest rates and the surge of the US dollar took a toll on the world's financial markets.
Before Wednesday's meeting, the Organization of the Petroleum Exporting Countries and their allies, OPEC+, is weighing cutting outputs by more than a million barrels a day, according to sources to Reuters.
If the decision goes through, this would be the group's second consecutive monthly cut after output reduction by 100,000 barrels a day last month.
According to the sources, however, OPEC+ missed its production goals in July by 3 million barrels a day. Sanctions against some of the group's members and low investment by other members impeded the group's performance.
"Anything less than 500,000 barrels a day would be shrugged off by the market. Therefore, we see a significant chance of a cut as large as 1 million barrels a day," ANZ analysts said in a note.
FGE, a consultancy, wrote that while Brent prices would strengthen short-term productivity, an impending global recession lurks in the background and would likely limit the upside.
"If OPEC+ does decide to cut output in the near term, the resultant increase in OPEC+ spare capacity will likely put more downward pressure on long-dated prices," FGE wrote on Friday.