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OIL FUTURES: Crude rallies as OPEC+ agrees to 2 mil b/d production cut

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OIL FUTURES: Crude rallies as OPEC+ agrees to 2 mil b/d production cut

Highlights

OPEC+ cut defies US pressure

ICE Brent tests three-week high

US crude, product inventories decline

  • Author
  • Chris van Moessner
  • Editor
  • Ankit Ajmera
  • Commodity
  • Oil

Crude oil futures moved higher in midmorning trading in New York Oct. 5 after OPEC and its allies agreed to slash output in November.

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At 1542 GMT, NYMEX November WTI was up $1.76/b at $88.28/b and ICE December Brent rose $2.00/b to $93.80/b.

OPEC and its allies, at their first in-person meeting since March 2020, agreed Oct. 5 to trim November production levels by 2 million b/d. The cuts come in defiance of US pressure to avoid a potential spike in oil prices.

The cuts "send an unambiguous message to the market about a willingness to reduce supply to support rising price objectives," S&P Global analysts Paul Sheldon and Shin Kim said, noting that the failure of most members to reach even their current quota levels means the actual impact of the cuts will be less than the headline figure.

NYMEX November ultra low sulfur diesel was up 17.23 cents at $3.7081/gal and November RBOB increased 1.34 cents/gal to $2.6965/gal.

Oil prices had been trending higher ahead of the OPEC+ decision on the heels of US inventory draws.

US distillate stocks declined 3.44 million barrels to 110.92 million barrels in the week to Sept. 30, the US Energy Information Administration said Oct. 5. The counter-seasonal draw put stocks at a nine-week low and left them nearly 21% behind the five-year average for this time of year.

US Atlantic coast diesel stocks were lower for a fourth straight week, falling 1.71 million barrels to 23.85 million barrels. USAC diesel stocks are now at the lowest since late May and stand 44% behind the EIA five-year average.

Tight USAC inventories likely aided the rally in the front month NYMEX ULSD contract, which surged 5 cents on the heels of the EIA report.

US commercial crude stocks declined 1.36 million barrels to 429.2 million barrels, the EIA said. The draw helped pushed oil futures, which were trading sideways ahead of the report, into positive territory.