Oil began the week with further gains as OPEC+’s decision to pause production hikes in the first quarter of next year eased fears of oversupply sending prices higher.
The international benchmark, Brent crude futures, traded at $64.76, while US West Texas Intermediate cost $60.92 a barrel. Alongside pauses in the new year, OPEC+ countries agreed on Sunday to increase output by a small 137,000 barrels per day in December, maintaining the pace set for October and November.
Meanwhile, investors expect fresh Western sanctions on Russia, targeting Rosneft and Lukoil, to hinder the country’s ability to boost production further. At the same time, major Western oil companies are benefitting from the disrupted supply of Russian refined fuels due to attacks and sanctions. Refining margins have risen substantially, giving the oil majors a boost.
“The decision by producers’ cartel OPEC+ to pause further output hikes at the start of next year, amid concerns about a glut of supply, helped give oil prices a lift and, in turn, boosted UK market heavyweights BP and Shell,” said AJ Bell investment director Russ Mould. The movements also came as BP announced it had agreed to divest stakes in U.S shale assets to Sixth Street investment firm on Monday.
However, despite the recent rebound in prices, analysts remain cautious. J.P Morgan noted that global oil demand has risen by 850,000 barrels per day year-to-date, falling short of earlier expectations of 900,000 barrels per day, while high-frequency indicators point to subdued U.S consumption due to weaker travel and shipping activity reducing demand from the world’s largest oil consumer.
Next week’s fuel card prices will rise in the region of 1.1 pence per litre.
