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Markets

Oil rises above $78 as OPEC+ meeting looms

  • OPEC and its allies meet on Monday
  • OPEC+ considering boosting supplies, sources say
  • Strengthening US dollar weighs on crude price
  • US oil inventories rise in weekly report
Updated 01 Oct 2021

LONDON: Oil rose above $78 a barrel on Friday, within sight of this week's three-year high, supported by tight supplies due to OPEC+ supply curbs, recovering demand and a weaker US dollar.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meet on Monday. The group is slowly unwinding record output cuts made last year, although sources say it is considering doing more.

Brent crude rose 41 cents, or 0.5%, to $78.72 by 1403 GMT, heading for its fourth weekly rise. US West Texas Intermediate (WTI) added 24 cents to $75.27, set for a sixth week of gains.

Oil drops for a second day after rally peters out

"The near-term price outlook remains supportive," said Stephen Brennock of oil broker PVM. "The current price trend is one for recovery."

Crude also gained support from weakness in the US dollar. A weaker dollar makes oil cheaper for holders of other currencies and tends to reflect increased investor risk appetite.

Brent has risen over 50% this year and reached a three-year high of $80.75 on Tuesday. OPEC+ is facing pressure from consumers such as the United States and India to produce more to help reduce prices.

Jeffrey Halley, analyst at brokerage OANDA, said there was potential for Monday's OPEC+ meeting to disappoint in terms of adding more supply, citing the inability of some members to raise output and the appeal of high prices to boost revenues.

"Whichever way you cut it; shorting oil is only for the brave with very deep pockets," he said.

Oil is also finding support as a surge in natural gas prices globally prompts power producers to move away from gas. Generators in Pakistan, Bangladesh and the Middle East have started switching fuels.

"The most likely reason for stable oil prices is that investors believe the supply-demand gap will widen as the power crisis worsens," said Naeem Aslam, analyst at Avatrade.

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