DTN Oil Update
Oil Extends Gains on Smaller-Than-Expected OPEC Hike
VIENNA (DTN) -- Oil prices rose for a second day Tuesday morning, supported by the smallest monthly production quota hike by the Organization of Petroleum Exporting Countries since the group started to unwind output curtailments. At the same time, U.S. and EU officials have signaled closer cooperation in sanctions enforcement, and the institution of new sanctions on Russian energy trade. Saudi Aramco, meanwhile, slashed prices for October delivery to Asia, signaling soft demand expectations.
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NYMEX-traded WTI for October delivery rose $1.10 to trade near $62.97 bbl, and ICE Brent for November delivery gained $1.20 to $66.70 bbl.
October RBOB gasoline futures added $0.0269 to $1.9911 gal, and the front-month ULSD contract was up $0.0419 to $2.3289 gal.
The U.S. Dollar Index dropped 0.163 points to 97.565.
The 2.2 million bpd in voluntary production cuts, which eight OPEC member countries had shouldered for more than a year on top of the existing OPEC+ curtailment agreement, have with the production targets set for September been fully unwound -- at least on paper. On Sunday, they agreed to an additional output increase in October, but at 137,000 bpd, the smallest monthly hike since OPEC started to ramp up production earlier this year was perceived as a bullish signal by market participants, given the hikes in August and September having been three times larger.
Oil prices have been trading in a narrow range over the past 10 weeks, caught between bearish long-term expectations of slowing demand growth and swelling inventories, and bullish signals in the form of low inventories in transparent OECD markets and geopolitical supply concerns surrounding Russian oil. While prices have inched higher for a second day, OPEC's cautious approach, and Saudi Aramco slashing prices for buyers in Asia may indicate that the pressure of bearish fundamentals will in the long run outweigh supply risk factors.