Oil slides 6% as OPEC+ is said to be discussing partial reversal of production cuts and increasing output by up to 500,000 barrels a day

Advertisement
Oil slides 6% as OPEC+ is said to be discussing partial reversal of production cuts and increasing output by up to 500,000 barrels a day
Tetra Images - Dan Bannister/Getty Images
  • Oil prices Monday, extending losses after a WSJ report that OPEC+ was discussing an output increase.
  • Delegates said an increase would be in response to expectations of higher demand in the winter months.
Advertisement

Oil prices stretched losses Monday to 6% following a report that OPEC and its allies are considering increasing output in anticipation of higher seasonal demand.

The talks between Saudi Arabia and other oil producers could result in a production increase of up to 500,000 barrels a day at their December 4 meeting, The Wall Street Journal reported, citing unnamed OPEC+ delegates. Such a move would mark a partial reversal of the group's supply cuts announced in October.

Oil prices extended losses ahead of the report. Brent crude, the international benchmark, fell as low as $82.32, the weakest price since January 11. West Texas Intermediate crude fell as much as 6.2% to $75.08 a barrel, the lowest price since January 3. Brent and WTI later trimmed their declines to roughly 5% each.

Oil prices have slumped about 10% since the first week of November and output increases tend to put downward pressure on prices. Delegates told WSJ a supply increase would be in response to expectations of rising oil consumption in the winter. Demand is expected to increase by 1.69 million barrels a day to 101.3 million barrels a day in the first quarter of 2023, compared with the average level in 2022, the report said.

The OPEC+ meeting will be held a day before the European Union is set to put an embargo on Russian oil and the Group of Seven organization of the world's wealthiest nations plans to launch a price cap on Russian crude sales that could potentially take Moscow's supplies off the market.

Advertisement

OPEC+ in October decided to cut output by 2 million barrels a day. The White House said that decision undermined global efforts to curb Russia's war in Ukraine. Talk of a production increase sets up a potential fight between Saudi Arabia and Russia, OPEC+'s two heavyweight producers, WSJ reported.

Oil prices earlier Monday had fallen on concerns about demand from China. Beijing and the city of Guangzhou tightened COVID restrictions over the weekend as infection cases rose and the country reported three coronavirus-related deaths, the first since May. China in recent weeks had loosened some COVID rules, including reducing the amount of time that travelers infected with the virus were required to quarantine in hotels.

China reported more than 24,000 new COVID infections over the weekend, the Associated Press reported.

{{}}