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Oil jumps 4% to 5-week high lifted by OPEC+ output cut

Economy Oct 09, 2022 09:30PM ET
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© Reuters. FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic
 
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By Scott DiSavino

NEW YORK (Reuters) - Oil prices jumped about 4% to a five-week high on Friday, lifted again by an OPEC+ decision this week to make its largest supply cut since 2020 despite concern about a possible recession and rising interest rates.

Oil rallied for the fifth day in a row even as the dollar moved higher after data showing the U.S. economy was creating jobs at a strong pace gave the Federal Reserve a reason to continue hefty interest rate hikes.

A strong greenback can pressure oil demand, making dollar-denominated crude more expensive for other currency holders.

Brent futures rose $3.50, or 3.7%, to settle at $97.92 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $4.19, or 4.7%, to end at $92.64.

That was the highest close for Brent and WTI since Aug. 30. The price jump pushed both benchmarks into technically overbought territory for the first time since August for Brent and June for WTI.

Both contracts posted their second straight weekly gains, and their biggest weekly percentage gains since March this week, with Brent was up about 11% and WTI 17% higher.

U.S. heating oil futures jumped 19% this week to their highest close since June, boosting the heating oil crack spread - a measure of refining profit margins - to its highest close on record, according to Refinitiv data going back to December 2009.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, agreed this week to lower their output target by 2 million barrels per day.

"Among the key ramifications of OPEC's latest cut is a likely return of $100 oil," said Stephen Brennock of oil broker PVM.

UBS Global Wealth Management also projected Brent would "move above the $100 bbl mark over the coming quarters."

The OPEC+ cut comes ahead of a European Union embargo on Russian oil and will squeeze supply in an already tight market.

OPEC Secretary General Haitham al-Ghais said the output target cuts will leave OPEC+ with more supply to tap in the event of any crises.

On Thursday, U.S. President Joe Biden expressed disappointment over the OPEC+ plans. He and U.S. officials said Washington was looking at all possible alternatives to keep prices from rising.

However, the U.S. oil rig count, an early indicator of future production, fell by two this week to 602, according to energy services firm Baker Hughes Co, as high inflation forces producers to spend more money to secure workers and equipment. [RIG/U]

"Oil futures prices are managing to gain upside traction even though widespread inflation across the U.S. and Europe is threatening the potential for a global recession where demand will likely take a sizeable hit," analysts at energy consulting firm Gelber & Associates said.

In Europe, divisions between EU leaders over capping gas prices and national rescue packages resurfaced, with Poland accusing Germany of "selfishness" in its response to a winter energy crunch caused by Russia's war in Ukraine.

(This story has been refiled to correct milestone for WTI to Aug. 30, not 29, in paragraph 5)

Oil jumps 4% to 5-week high lifted by OPEC+ output cut
 

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Comments (4)
Ac Tektrader
Ac Tektrader Oct 07, 2022 8:19PM ET
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more scam and sca
Mike Nordic
MikeNordic Oct 07, 2022 11:57AM ET
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What a surprise, apparently OPEC and oil prices don't care if rates are high and apparently raising rates won't create more oil either
perplexed76 .
perplexed76 . Oct 07, 2022 11:42AM ET
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i couldn't sell one box of potatoes a week ago. So i decided to cut potato sells this week by one box.
Stephen Fa
Stephen Fa Oct 07, 2022 11:38AM ET
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Going to be a cold green winter in northern Europe
 
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