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Oil falls but heads for weekly gain as OPEC+ considers output cut

Oil falls but heads for weekly gain as OPEC+ considers output cut

FILE PHOTO: A 3D-printed oil pump jack is seen in front of the OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/File Photo

HOUSTON: Oil prices dipped on Friday (Sep 30) in choppy trading but were on track for their first weekly gain in five on Friday (Sep 30), underpinned by the possibility that OPEC+ will agree to cut crude output when it meets on Oct 5.

Brent crude futures for November, which expire on Friday, fell 44 cents, or 0.5 per cent, to US$88.05 a barrel by 11:18am ET (1718 GMT). The more active December contract was down US$1.71 at US$85.49.

US West Texas Intermediate (WTI) crude futures fell US$1.34, or 1.7 per cent, to US$79.88.

Both contracts rose by more than US$1 earlier in the session but dropped on news that OPEC's oil output rose in September to its highest since 2020, surpassing a pledged hike for the month, according to Reuters survey on Friday.

"There is definitely some profit taking from the gains we saw earlier in the week. US$80 is sort of the pivot point these days," said John Kilduff, partner at Again Capital LLC in New York.

"Increased worries about financial stability in the UK and, and potentially spreading, is undermining the demand outlook once again," Kilduff added.

While the dollar has dropped from 20-year highs earlier in the week, it rose with early US trading. A stronger greenback makes dollar-denominated oil more expensive for buyers holding other currencies, reducing demand for the commodity.

"Price swings have become the norm as market players juggle worries over the global economy and the prospect of tightening oil supplies," said Stephen Brennock of oil broker PVM.

Brent and WTI are still set for a weekly gain of around 2 per cent. It would be the first weekly rise since August and follows nine-month lows hit this week.

The market has seen support from the prospect of the Organization of the Petroleum Exporting Countries (OPEC) and its allies considering cutting production quotas by between 500,000 and 1 million barrels per day (bpd) at their Oct 5 meeting.

"A deteriorating crude demand outlook won't allow oil to rally until energy traders are confident that OPEC+ will slash output," senior OANDA analyst Edward Moya said.

Analysts expect a production cut because demand fears linked to a possible global economic slowdown and rising interest rates have weighed on crude prices.

Brent and WTI prices are likely to finish the third quarter with a chunky 23 per cent decline.

"Expect oil prices to receive a supportive kick up the backside next week," PVM's Brennock said.

Analysts also expect buying to lift as Russia prepares to annex four Ukrainian regions to Russia on Friday in a move that could force Western nations to strengthen sanctions against Moscow.

Source: Reuters
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