Oil Prices Fall on Saudi Comments on OPEC Production

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Oil prices fell on Monday after conflicting reports emerged that the Organization of the Petroleum Exporting Countries (OPEC) is not considering a daily production increase of half a million barrels.

Brent crude futures fell 77 cents, or 0.9 percent, to $86.85 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 58 cents, or 0.7 percent, to $79. 50 per barrel.

Both benchmark indices had tumbled by more than $5 a barrel early on the effect of continued demand concerns from China.

However, the market rallied after the Wall Street Journal reported that an increase of up to 500,000 barrels per day would be considered at the OPEC+ meeting on December 4.

However, prices retracted after Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said the Kingdom was not discussing a possible increase in oil production with other OPEC members.

“It is well known that OPEC+ does not discuss any decision before the meeting,” he said.

Last month, OPEC+ unexpectedly decided to slash production targets. It would be unusual for the group to increase production at a time of falling prices and growing concerns about the economic outlook.

He was also quoted as saying that OPEC+ was ready to cut production further if necessary.

“The current 2 million barrels per day cut by OPEC+ continues through the end of 2023, and if further action is needed by reducing production to balance supply and demand, we will always be ready to intervene,” he said.

The market was also pressured by potential interest rate hikes that boosted the dollar, making dollar-denominated commodities like crude oil more expensive for investors.

The US dollar rose 0.9 percent against the Japanese yen to 141.665 yen, pacing its biggest one-day gain since Oct. 14. The euro fell 0.74 percent against the dollar to $1.0248.

New COVID-19 restrictions in China fueled concerns about the global economic outlook and caused traders to shy away from riskier assets like oil.

China’s capital warned Monday it was facing its most severe test of the COVID-19 pandemic, closing businesses and schools in the hardest-hit districts and tightening rules for entering the city as infections spiked in Beijing and nationwide. .

It recorded two deaths in Beijing, up from one on Saturday, which was China’s first since late May, while 26,824 new local cases were posted for Sunday, approaching the country’s daily infection peak in April.

The new cases have cast doubt on hopes that the Chinese government can soon ease its tough restrictions on the world’s biggest oil importer. This has boosted the dollar, which is seen as a safe haven in times of stress.

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