Oil rebounds ahead of OPEC+ meeting

Oil prices rose on Friday on expectations that OPEC+ will discuss production cuts at a Sept. 5 meeting, though concerns over China’s COVID-19 restrictions and weak oil global economy continued to limit gains.

Brent crude futures were up $1.42, or 1.5%, at $93.78 a barrel at 11:40 GMT and US West Texas Intermediate (WTI) crude futures were up. rose $1.43, or 1.7%, to $88.04.

Both benchmarks slid 3% to two-week lows in the previous session and Brent was on track for a weekly decline of almost 7% while WTI was forecast for a drop of around 5% during the week.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are due to meet on September 5 amid an expected drop in demand, although top producer Saudi Arabia says supply remains tight.

“Oil prices are higher today after falling near summer lows over the week. The rebound comes as nuclear talks between Iran and the United States appear to have stalled” , said Craig Erlam, senior market analyst at OANDA.

“A deal has recently been a big downside risk to oil prices; something Saudi Arabia has sought to counter with warnings of production cuts from the alliance.

OPEC+ this week revised market balances for this year and now sees demand lagging supply by 400,000 barrels per day (bpd), compared to 900,000 bpd previously forecast. The producer group expects a market deficit of 300,000 bpd in its base case for 2023. read more

The market is also keeping an eye on a possible price cap for Russian oil exports.

G7 finance ministers are expected to confirm on Friday their intention to impose a price cap on Russian oil, in a bid to limit Moscow’s war revenue in Ukraine, but hold crude to avoid price spikes. Read more

Meanwhile, investors remain worried about the impact of China’s latest COVID-19 restrictions. The city of Chengdu ordered a lockdown on Thursday that hit automakers including Volvo . Read more

Data showed Chinese factory activity in August contracted for the first time in three months amid weakening demand, while power shortages and COVID-19 outbreaks also disrupted the production. Read more
Source: Reuters (Reporting by Noah Browning Additional reporting by Sonali Paul in Melbourne and Jeslyn Lerh in Singapore Editing by David Goodman)

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