(Montel) Oil prices were firming on Tuesday – off near nine-month lows hit in the prior session – on indications Opec and its allies – Opec+ – could institute further production cuts to balance the market.
The front-month contract for Brent crude North Sea oil was last seen up USD 1.25 at USD 85.31/bbl, while the WTI equivalent was also USD 1.25 higher at USD 77.96/bbl. Both contracts had traded at their lowest points since early January yesterday.
“If the [oil] price weakness persists, we will need to keep a lookout for possible Opec intervention,” said ING bank in a note, with Iraqi Oil Minister Ihsan Abdul Jabbar saying on Monday that the cartel were monitoring the price situation.
“The group has made it clear in recent months about the possibility of further action given the apparent disconnect between the physical and the paper market,” it added, with the oil cartel agreeing earlier this month to cut production in October by 0.1m bbl/day to prop up prices.
Opec’s de facto leader Saudi Arabia has said previously that the cartel would be ready to curb production to address “extreme volatility” in the market.
“If it is not there already, the market is trading towards levels where Opec will be getting uneasy. The group are scheduled to meet next week,” said ING.
Opec was working against the backdrop of a market facing “significant pressure” from a surging US dollar, “while a raft of central banks tightening monetary policy dims the demand outlook”, it added.
Amid growing recession fears, the US Federal Reserve on Wednesday raised key interest rates in the world’s biggest economy by 75 basis points for the third time in three months, taking them to their highest level in nearly 15 years. The Bank of England on Thursday boosted rates to the highest level for 14 years.
Meanwhile, the market “is also keeping an eye on a hurricane in the Gulf of Mexico”, said Australia’s ANZ bank in a note.
“Chevron and BP have both shut platforms southeast of New Orleans. However, its current track leaves most of the gulf’s energy complex unscathed.”