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Oil jumps nearly 4% on possible OPEC+ supply tightening

Published 08/22/2022, 08:38 PM
Updated 08/23/2022, 05:20 PM
© Reuters. FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016.  REUTERS/Nick Oxford

By Laila Kearney

NEW YORK (Reuters) -Oil prices surged by nearly 4% on Tuesday after Saudi Arabia floated the idea of OPEC+ output cuts to support prices in the case of returning Iranian crude and with the prospect of a drop in U.S. inventories.

The Saudi energy minister said OPEC+ had the means to deal with challenges including cutting production, state news agency SPA said on Monday, citing comments Abdulaziz bin Salman made to Bloomberg.

Global benchmark Brent crude settled at $100.22 a barrel, up $3.74, or 3.9%. U.S. West Texas Intermediate crude closed $3.38, or 3.7%, higher at $93.74 a barrel.

Brent settled at its highest price since Aug. 2 and WTI logged its strongest settlement since Aug. 11.

The prospect of resuming Iranian crude supply and recession fears, along with consecutive weekly builds at the U.S. crude oil storage hub, easing gasoline demand, and the upcoming refinery maintenance season has pushed prices lower in recent weeks and set the tone for OPEC+, said Bob Yawger, director of energy futures at Mizuho.

"That is the situation that's getting the Saudi oil minister a little bit beside himself," Yawger said. "He was stressing the point that the dynamics were a bit out of whack with reality."

In the comments reported on Monday, the Saudi minister said the paper and physical oil markets had become "disconnected."

However, nine OPEC sources told Reuters on Tuesday OPEC+ production cuts may not be imminent and would coincide with the return of Iran to oil markets should Tehran clinch a nuclear deal with the West.

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A senior U.S. official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.

Oil has soared in 2022, coming close in March to an all-time high of $147 after Russia's invasion of Ukraine exacerbated supply concerns. Fears about a global recession, rising inflation and weaker demand have since weighed on prices.

While the price of Brent has fallen sharply from this year's high, the market structure and price differentials in the physical oil market still point to supply tightness.

Underlining tight supply, the latest U.S. inventories weekly reports are expected to show crude stocks declining 900,000 barrels last week.

U.S. crude stockpiles were expected to have fallen, while fuel stocks rose in the latest week, according to market sources citing American Petroleum Institute figures on Tuesday.

Crude stocks fell by about 5.6 million barrels for the week ended Aug. 19. Gasoline inventories rose by about 268,000 barrels, while distillate stocks rose by about 1.1 million barrels, according to the sources, who spoke on condition of anonymity.

API data is followed by the government's report at 10:30 a.m. EDT on Wednesday.

Latest comments

OPEC will bring western democracies down...soon right-wing uprising in italy
I'm not surprised that you cheer a right wing uprising and the fall of democracy.
OPEC grab Democrates neck now, oil produce decline means rapid price up, and it will kill the dovish fr and democrates hope for coming election very clearly.
This is still speculations and not facts nor reality. If irani deal closed, price will go down on that and the slowing economy is the main factor in lower price. Same as 2007-2009.
Democrates was a Greek philosopher who died a long time ago. I doubt he has any hopes for the upcoming election.
If opec cuts production we should just nuke them Russia and China in a massive first strike. It would be a great way to cut down on greenhouse gases
If US use nuke at sometime, entire US territory will be ground zero. The first nuclear power is not US, it's Russia.
grow up
Beautiful soon Politicians in Europe have to flee the Country...its about time Elections in italy coming month will be a blast to witness
cant wait for the mass unemyployment which will erradicate all those green/gender/migrant bull ******jobs
I think it's just a complete lack of brain cells on top of right wing propaganda being blasted all day.
hey Jason how is Buttcoin doing ? you know what the problem is with ponzies ? runs out of r_tards
You despise a lot of kinds of people. Are you okay? Did someone touch you when you were little?
All you people that think oil should be cheap must not know that a barrel is 42 gallons. Oil is the most troublesome resource to acquire. It comes from miles below the earth’s surface. Learn a little more about what it takes to get it to your car and you will appreciate it and the people that get it there.
A lot of people in a lot of fields work hard.
All motors can now be switched to run on water 💧. It has already been patented, nothing can stop this and this means all oil and gas production for energy is going to not be needed. The only cost will be a few hundred dollars to add the conversion kit. no need for gas tanks.
Work hard? Give me a break anything over 60 a barrel is price gouging
Opec has right to reduce oil production and manage its price. We should accept that not only US manage the oil price. No.
Captain Obvious.
Where do these donkeys come from? Standing up for Opec? Seriously
the characters always frightening .. speculating are the same ones that said it reached 300 !!!
100% Minipulation and the SEC doesn't even lift a finger.
let the evil and greedy Saudis be punished by God for inflicting pains and sufferings on the commoners
hail satan
you see how cruel the OPEC --- indeed they are the one who made the world suffering from this OIL prices...we hope also the rest of the courtries selling Foods to SAUDI at very much higher price too...Saudi will never survive without importation of food so better do the same to them
biden has gotta to be p*ssed. time to initiate plan b of regime change like US has always done to small non-compliant states with lots of good potential puppet candidates??
And when it doesn't happen, you will adjust your opinion?
Powell fight with opec not with poor people
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