"OPEC+" Drives Oil Prices Up with Disappointing Production Increase Decision
Oil prices surged during trading on Tuesday, supported by the "OPEC+" alliance's decision to increase production by less than expected, alongside ongoing concerns about supply tightening due to the possibility of new sanctions on Russia.
Brent crude recorded gains of 0.6% to reach $66.46 per barrel, while West Texas Intermediate crude rose by a similar percentage to reach $62.68 per barrel.
In a surprising market decision, eight members of the "OPEC+" alliance agreed on Sunday to increase production starting in October by only 137,000 barrels per day. This increase represents a sharp decline compared to previous increases seen over the past four months, which ranged from 411,000 to 555,000 barrels per day, and it came in below the expectations of many analysts.
Daniel Hynes, senior commodity analyst at "ANZ", commented on the decision, saying in a client note that the "OPEC+" decision "is a retreat from the cuts that were supposed to last until the end of 2026, following the rapid return of the previous quantity of suspended barrels over the past months".
On the other hand, prices are receiving additional support from rising speculation about imposing stricter sanctions on Russia, after Moscow launched the largest airstrike on Ukraine, resulting in a fire at a government building in Kyiv. U.S. President Donald Trump stated that he is ready to move to "phase two" of restrictions on Russia.
As part of intense diplomatic moves, the EU's chief sanctions officer visited Washington with a team of experts to discuss the first coordinated transatlantic measures against Russia since Trump's return to the White House. Any escalation in sanctions is expected to reduce Russian oil supplies in global markets, thereby increasing upward pressure on prices.
Meanwhile, investors are keenly awaiting the meeting of the Federal Open Market Committee of the U.S. Federal Reserve next week, where market odds indicate an 89.4% chance of a quarter-point interest rate cut. Any easing of monetary liquidity would lower borrowing costs and stimulate economic growth, which in turn would boost demand for oil.
