Oil prices increase marginally

30 Sep 2022 , 08:39 AM

Despite little movement in early trading on Friday, oil prices were on track for their first weekly rise in five weeks, supported by a falling US dollar and the likelihood that OPEC+ will decide to reduce crude output when it meets on October 5.

US West Texas Intermediate (WTI) oil futures for delivery in November increased 6 cents to $81.29 a barrel after declining 92 cents the previous session.

After falling 83 cents the previous day, November Brent crude futures, which expire on Friday, eked out a 2-cent gain to $88.51 per barrel. To $87.19, the more active December contract increased by one cent.

After hitting nine-month lows earlier in the week, both Brent and WTI are on course to rebound by nearly 3% for the week, marking their first weekly increase since August.

Brent will decline for a fourth consecutive month in September, falling by 8% for the entire month. Brent experienced a 23% decline during the third quarter, marking its first quarterly loss since the fourth quarter of 2021.

WTI is expected to dip by 9% in September, marking its fourth consecutive monthly reduction, and it fell by 23% for the quarter, marking the first quarterly decline since the March 2020 to March 2021 period when COVID-19 negatively impacted demand.

In light of the European Union’s planned import embargo on Russian oil beginning on December 5, analysts said the market appeared to have found a floor and supply was expected to tighten. The main question is how much demand will decline as global economy slows as a result of ad hoc interest rate hikes.

Prior to their meeting on Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, collectively known as OPEC+, have started talking about reducing their output, according to Reuters report.

According to news reports, Russia could propose a reduction of up to 1 million barrels per day.

The dollar’s decline from earlier in the week’s 20-year highs helped to support oil prices as well. Demand for the commodity increases as a result of purchasers holding foreign currencies being able to purchase dollar-denominated oil at a lower price.

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