Probability of OPEC supply cuts is driving up oil prices

25 Aug 2022 , 09:39 AM

After Saudi Arabia said the Organization of the Petroleum Exporting Countries would consider cutting output, oil prices jumped in early Asian trade on Wednesday. However, negative economic signals from central bankers and declining equities weighed on the market.

U.S. crude prices increased 34 cents to $95.23 per barrel by 00:16 GMT, while Brent crude futures increased 51 cents to $101.73 per barrel. After the Saudi energy minister suggested that output might be reduced, both crude oil benchmark contracts reached three-week highs on Wednesday.

Later, OPEC sources told Reuters that any reduction by the producer group and its allies, known as OPEC+, is likely to coincide with the return of Iranian oil to the market should Teheran win a nuclear agreement with international powers.

Iran claimed to have received a response from the US to the EU’s “final” document for the restoration of Tehran’s nuclear agreement with major powers from 2015.

This week’s trade has been erratic as speculators attempt to predict, ahead of the U.S. Federal Reserve meeting on Friday, whether the central bank would delay rate hikes or remain active until it reduces inflation down to its objective of 2%. Gasoline demand was weak on Wednesday, according to U.S. government data, which portends a significant slowdown in economic activity.

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