OPEC Announces Cuts as Oil Prices Hike

Ahead of the 2024 US elections, oil prices have increased by nearly 3% following another OPEC oil production cut. Additionally, a new tropical storm forecast threatens US Gulf production, while ongoing political tensions add to the uncertainty.

OPEC+ postponed its plan to increase oil production by 180Mb/d, originally scheduled for December. The organization announced that Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman agreed to extend the 2.2MMb/d voluntary production cuts for one month until the end of December 2024.

The recent announcements by Iraq, as well as a joint statement by Russia and Kazakhstan, strongly reaffirmed their commitment to the agreement, including additional voluntary production adjustments and compensation schedules for overproduced volumes since January 2024, reported OPEC.

As a result of these developments, Brent futures rose by US$1.98/b, or 2.7%, to US$75.08/b on Monday. US West Texas Intermediate (WTI) crude increased by US$1.98/b, or 2.85%, to US$71.47/b, reported Reuters.

OPEC’s renewed commitment to production cuts raises doubts about a price retaliation and suggests potential continuing cuts through 2025. However, OPEC Secretary General Haitham Al Ghais said the organization has a positive outlook on oil demand for next year.

In the United States, presidential candidates Kamala Harris and Donald Trump remain virtually tied in opinion polls going into Election Day. The winner may not be known for days after voting ends, adding to the uncertainty in the markets.

Investors are also closely watching for any escalation in Middle East tensions. According to Reuters, Israeli intelligence has suggested that Iran is preparing to launch an attack within the next few days. Meanwhile, markets are monitoring a new tropical storm forecasted to form in the Caribbean, which threatens offshore oil production along the Gulf of Mexico. “Tropical Storm Rafael formed in the Caribbean Sea Monday afternoon and could bring a rare November threat to the United States this weekend after tearing through parts of the western Caribbean,” reports CNN.