Oil prices plummet on US crude reserve release

Oil dips on symbolic OPEC+ output cut


MELBOURNE: Oil prices fell in early trade on Tuesday, reversing a 3% gain in the previous session, as the OPEC+ agreement to cut output by 100,000 barrels per day in October was seen as a major symbolic move to stem the market’s recent slide.

Brent crude futures were down 33 cents, or 0.3%, at $95.44 a barrel by 0054 GMT.

U.S. West Texas Intermediate (WTI) crude futures edged up to $89.13 a barrel from Monday, up $2.26, or 2.6%, from Friday’s close. There is no resolution for the U.S. Labor Day holiday on Monday.

The Organization of the Petroleum Exporting Countries and its allies led by Russia, collectively known as OPEC+, decided to cancel a 100,000 bpd increase in September after top producer Saudi Arabia and other members expressed concern over a slump in oil prices since June, despite tight supplies. read more

Analysts did not anticipate the deal even after Saudi Arabia said it wanted to support prices, saying the cuts were largely symbolic given OPEC+’s inability to meet its production targets.

“This move shows that while price cuts have little impact on supply and demand dynamics in the short term, they are still serious about supporting prices,” ANZ research analysts said in a note.

Further supporting prices, the European Union’s foreign policy chief said he had lowered hopes for a soon-to-date deal to revive a nuclear deal with Iran, which would delay the return of about 1 million bpd of Iranian crude to the market.

Justin Smirk, senior economist at Westpac, said the return of Iranian oil would likely only offset Russian production losses, so broader supply was unlikely to change much.

OPEC+ should be comfortable with oil prices staying around $90 a barrel, he said.

“Growth has taken a hit, interest rates are rising and the dollar is stronger, and prices haven’t fallen in a meaningful sense — reflecting a tight market. I don’t see why OPEC would change that,” Smilk said.

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