Oil prices rose sharply on Monday, with Brent crude gaining $1.18 per barrel, or 1.61%, to reach $74.28, while U.S. West Texas Intermediate (WTI) crude increased by $1.21, or 1.74%, to $70.70, following OPEC+’s announcement of a one-month delay in its plans to boost production.
The market reaction comes ahead of a pivotal week that includes the U.S. presidential election and a significant meeting in China.
On Sunday, OPEC+, which includes the Organization of the Petroleum Exporting Countries alongside Russia and other allies, confirmed it would extend its output cut of 2.2 million barrels per day (bpd) through December. This decision follows an already postponed increase that was originally scheduled for October, driven by falling prices and weak demand.
Initially, OPEC+ planned to boost output by 180,000 bpd starting in December, but this increase has now been shelved. Despite the current uptick in prices, both Brent and WTI experienced declines last week, with approximately 4% and 3% losses, respectively, largely due to record U.S. production impacting market stability. The prices did see a slight recovery on Friday, influenced by reports suggesting Iran might be preparing to retaliate against Israel.
Israeli intelligence indicated that Iran could launch an attack on Israel from Iraq in the coming days, as cited by two unidentified sources.
Market analysts express caution regarding the sustainability of the current price increases. Yeap Jun Rong, a market strategist at IG, noted that past instances of initial positive reactions to output changes and geopolitical tensions have often dissipated. He anticipates that oil prices will remain within a broad consolidation range, with any potential rise facing resistance around $78.50.
As markets look ahead to Tuesday’s U.S. presidential election, polls indicate a tight race between Democratic Vice President Kamala Harris and Republican former President Donald Trump. Additionally, economists expect the U.S. Federal Reserve to announce a 25 basis point interest rate cut on Thursday.
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