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As OPEC Talks About Cutting Output, Oil Prices Rise

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As OPEC Talks About Cutting Output, Oil Prices Rise

(CTN News) – On Tuesday, the price of crude oil rose as top exporter Saudi Arabia said Opec was sticking with its output cuts and it could take further steps to balance the market, outweighing concerns about the global recession and China’s rising Covid-19 case numbers.

A Wall Street Journal report published on Monday, which stated that Opec was considering increasing output, was also denied by Saudi Arabia’s energy minister Prince Abdul aziz bin Salman. This led to oil prices plummeting by over 5%, according to state news agency SPA.

In the early hours of this morning, Brent crude oil was up 37c, or 0.4%, to $87.82 by 9.15am GMT. A barrel of US West Texas Intermediate (WTI) crude was up 46c, or 0.6%, to $80.50 a barrel.

Ava trade analyst Naeem Aslam said the crude oil price is trying to recover from its losses. Due to the Saudi Arabian denials concerning any discussion with Opec and its allies about increasing oil supply, the market today has been supported as a result of the Saudi denial.

As of yet, there have been no indications that the United Arab Emirates, another major Opec producer, is holding discussions with other Opec producers to amend the latest Opec+ agreement, and Kuwait has stated that there have been no discussions about increasing output within Opec.

As part of Opec+, Opec and Russia will meet on December 4, a day before the European Union and the G7 will take measures in retaliation for Russia’s invasion of Ukraine, which would support the market for the rest of the year.

The EU is set to begin a ban on the import of Russian crude oil on December 5. This is in addition to the G7 plan which allows shipping companies to provide services for the export of Russian oil, but only if low prices are enforced.

According to Stephen Innes, managing partner at SPI Asset Management, the critical risk associated with a price cap policy is the possibility of Russian retaliation. This would turn this into another bullish shock for the oil market, in a report published in January.

As a result of the US Federal Reserve’s interest-rate hikes and China’s strict Covid-19 lockdown policy, oil demand is expected to be limited in the near future.

It was announced on Tuesday that Beijing had shut down parks, malls, and museums as part of a mass Covid-19 testing program. During the first week of the pandemic, the Chinese capital warned that it was facing one of the most severe challenges of all. It also said that entry regulations had been tightened.

As we approach the end of the week, we will be paying close attention to the latest supply snapshots released in the US, which are expected to reveal a drop of 2.2 million barrels in crude inventories.

It is expected that the American Petroleum Institute’s report will be published at 9.30pm GMT.

Who controls OPEC?

Saudi Arabia, which controls about one-third of OPEC’s total oil reserves, plays a leading role in the organization. Other important members are Iran, Iraq, Kuwait, and the United Arab Emirates, whose combined reserves are significantly greater than those of Saudi Arabia.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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