Oil Steadies After OPEC Output Hike

Oil steadied as traders weighed an OPEC+ decision to raise production at a modest against Saudi Aramco’s reduction in selling prices of its crude to Asia.

West Texas Intermediate crude edged up 0.6% to settle above $62 a barrel after losing more than 3% last week, when it became apparent that an output hike was on the way. The Organization of the Petroleum Exporting Countries and its partners decided to add 137,000 barrels a day in October, a smaller increment than they’d scheduled for the previous two months, leading investors to roll back bearish positioning. 

But crude pared earlier gains after Saudi Arabia on Monday cut pricing of its flagship grade for its main market in Asia next month, in a sign that the de facto cartel leader sees demand worsening.

“The market priced in the hike last week and is now focused on whether we start to see inventory builds and what reduced spare capacity could mean going forward,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “This looks like more of a relief rally — one that may stave off the bearish narrative briefly, but probably only for a day or two.”

The OPEC+ hike marks the reversal of cuts that were set to remain in place until the end of 2026 — following the rapid return of a previous tranche of idled barrels over recent months — as the alliance seeks to reclaim market share. Still, the actual volume is widely expected to be lower than announced, as some members of the group face pressure to forgo their share of increases to compensate for previous hikes, while others lack spare capacity. 

Early last month, the International Energy Agency predicted the surplus would reach a record next year, which Goldman Sachs Group Inc. forecasts will push Brent to the low-$50s. The global benchmark is down more than 11% this year, with President Donald Trump’s tariffs also weighing on the energy demand outlook.

OPEC+ said on Sunday that restarting the remainder of the 1.66 million barrels a day of cuts would be contingent on “evolving market conditions,” and increases could be reversed. The group’s faster-than-expected return of idled barrels over recent months stunned sections of the oil market, but prices have held up relatively well following an initial slump in April.

The OPEC+ decision wasn’t enough to break WTI out of the $62-to-$67 range it’s been in for the last month. 

“Saudi Arabia is in the driver’s seat again, they’re the only one with spare production capacity,” Jeff Currie, chief strategy officer of energy pathways at Carlyle, said in a Bloomberg TV interview. “It’s a very fine line between oil supply glut and running out of spare production capacity.”

The commodity was up earlier by as much as 2.4% after Bloomberg News reported that the European Union is exploring new sanctions on Russian banks and energy companies as part of its latest measures to end the war in Ukraine, a move it’s hoping to coordinate with the US.

Saudi Arabia’s Crown Prince Mohammed bin Salman is visiting Washington in November to meet with Trump, indicating there could also be political considerations behind the supply decision. The US president has repeatedly called for lower fuel prices as he seeks to tame inflation.

China’s stockpiling of roughly 200,000 barrels a day in recent months has helped to support demand, Frederic Lasserre, global head of research and analysis at Gunvor Group, said at the Asia Pacific Petroleum Conference in Singapore on Monday. Still, the country might not be able to absorb all of the impending market surplus, he added.

Oil Prices

WTI for October delivery advanced 0.6% to settle at $62.26 a barrel in New York.
Brent for November settlement rose 0.8% to settle at $66.02 a barrel.