The likelihood that OPEC+ will vote to cut output caused oil to rise, and Europe’s energy situation got worse as the Group of Seven nations backed a proposal to attempt and limit the price of Russian crude. After falling by about 7% the previous week because of worries that demand would be harmed by slowing global growth and anti-virus lockdowns in China, West Texas Intermediate rose beyond $88 per barrel. After Saudi Arabia suggested a production cut, the Organization of Petroleum Exporting Countries and allies, including Russia, will meet later on Monday to decide on output levels for October.
Since early June, when Moscow invaded Ukraine, crude has lost all of its gains. This is because the global economy has slowed and central banks have raised interest rates. Just after the G-7 ministers approved a US-led initiative to control the price of Russian oil, the Russian energy giant Gazprom PJSC said last week that gas shipments along a crucial pipeline to Germany would not resume.
According to James Whistler, managing director of Vanir Global Markets Pte, “We regard Gazprom’s decision to extend the Nord Stream 1 natural gas pipeline outage from the original three days to indefinitely as intimately related to the G-7 price cap.” Although it is intended to reduce Russian income while maintaining Russian supply, “the reality is likely the contrary and we may see supply disrupted.”
The majority of market observers predicted little change in supply at this time despite the Riyadh warning before the OPEC+ session. According to JPMorgan Chase & Co., output quotas will be carried over into October as summer surpluses will turn into deficits, necessitating no further reductions. Despite continued U.S. dollar growth, which normally works against commodities priced in U.S. dollars, crude gained on Monday.