Brent oil surges above $100 a barrel amid talks on OPEC austerity

An aerial view shows tugs helping a crude oil tanker to dock at an oil terminal, off the coast of Waidiao Island in Zhoushan, China’s Zhejiang province, July 18, 2022. cnsphoto via REUTERS

LONDON, Aug. 24 (Reuters) – Benchmark Brent oil climbed above $100 a barrel on Wednesday after Saudi Arabia suggested this week that OPEC might consider cutting production in response to poor liquidity in the crude oil futures market and fears of a global economic downturn.

Brent before the October settlement hit a three-week high, trading $1.30, or 1.3%, at $101.52 a barrel at 0850 GMT. US crude rose $1.18, or 1.3%, to $94.92 a barrel.

Contracts for both crudes rose Tuesday after Energy Minister Prince Abdulaziz bin Salman indicated the possibility of production cuts amid poor liquidity in the futures market and macroeconomic fears. read more

OPEC sources later told Reuters that any austerity measures by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, would likely coincide with a return of the Iranian market should Tehran strike a nuclear deal with world powers. read more

A US official said on Monday that Iran had dropped some of its key demands to revive a deal. read more

OPEC+ is already producing 2.9 million barrels per day less than its target, sources say, complicating any decision on spending cuts or calculating the baseline for a production cut. read more

“The outlook for oil price and supply suggests that a cut in OPEC+ is currently unjustified,” said PVM analyst Stephen Brennock, outlining potential supply threats that support the market.

“The global oil supply could take a hit as the peak hurricane season in the US approaches,” he said. “Otherwise, future power outages in Libya cannot be discounted, while Nigeria’s oil fortunes show little sign of improving.”

According to market sources citing figures from the American Petroleum Institute, US crude inventories fell by about 5.6 million barrels in the week ended August 19. Analysts had estimated a 900,000 barrel drop in a Reuters poll.

The US government figures will be released on Wednesday.

Market participants will watch Friday’s speech by Federal Reserve Chairman Jerome Powell at the central bank’s Jackson Hole symposium. He is expected to emphasize the Fed’s focus on controlling inflation.

Additional reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo

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