Global oil futures settled lower on Tuesday, with Brent crude giving back gains scored in the previous session after the Organization of the Petroleum Exporting Countries and its allies agreed to cut output by 100,000 barrels a day in October.
November Brent crude
-0.70%BRNX22, -0.70%, the global benchmark, fell $2.91, or 3%, to settle at $92.83 a barrel on ICE Futures Europe, after climbing 2.9%, on Monday.
- October West Texas Intermediate crude CL. 1 CL00 CLV22 , the U.S. benchmark, edged up by a penny to settle at $86.88 a barrel on the New York Mercantile Exchange after climbing 0.3% on Friday. U.S. markets were closed Monday in observance of Labor Day.
+0.66%fell 1.9% to $2.4159 a gallon, while October heating oil HOV22, -1.36%lost 0.1% to $3.5738 a gallon.
October natural-gas futures
+1.45%dropped 7.3% to $8.145 per million British thermal units. That followed a sharp decline in European benchmark prices as Russia’s Gazprom and Germany’s Siemen’s Energy reportedly clashed over maintenance to the Nord Stream 1 pipeline.
OPEC+, which is the combination of OPEC and other major producers including Russia, agreed on Monday to cut output by 100,000 barrels a day in October, reversing a September rise agreed at the group’s previous meeting in early August.
In terms of signaling, “the move is important as it indicates that OPEC+ is watching demand very closely and is trying to manage supply to keep a floor on oil prices,” said Noah Barrett, research analyst for energy & utilities at Janus Henderson Investors.
Several countries have called on OPEC+ to increase supply but OPEC+ is “clearly sending a message that they are not bowing to external demands,” he said, in emailed commentary.
While Saudi Arabia’s energy minister last month had raised the possibility of a cut, a move on Monday was unexpected following reports that Moscow had opposed a reduction.
“OPEC isn’t happy to see oil prices ease with the recession talk, and cutting supply suddenly dwarfs the demand side of the problem and should, in theory, reverse the trend back to bullish,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a Monday note.
Beyond the knee-jerk bounce for Brent, analysts played down the move as largely symbolic, noting that OPEC+ members have consistently fallen short of output targets.
“The marginal production cut makes just as little difference as the corresponding hike a month ago, especially as the cartel’s output is well below target in any case, so no reduction in supply is in fact needed at all,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
The Monday bounce was partly inspired by OPEC+. The cartel was prepared to hold emergency meetings in response to pronounced price slides, analysts said.
It is “the symbolism about future policy responses that matters. Above all, we think [OPEC+] are seeking to put short sellers on notice that they will not easily surrender the recent gains and go gently into the night,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a note.
The OPEC+ decision comes as a report from the Centre for Research on Energy and Clean Air published Tuesday showed that Russia sent significantly more oil and coal to India and China during the summer, compared with the start of the year, according to the Associated Press .
Meanwhile, Saudi Arabia sharply cut the prices of its crude oil exports for Asian and European buyers for October.
Oil futures have retreated sharply from prices in March, more than giving up gains that took crude to roughly 14-year highs following Russia’s late-February invasion of Ukraine. New lockdowns in China and worries about aggressive tightening of monetary policy by major central banks have raised concerns about global demand.
As a result of Monday’s holiday, the Energy Information Administration’s weekly U.S. petroleum supply report will be delayed by a day to Thursday.