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Oil prices jump amid fears of production cuts

Monday,   03-Oct-2022   10:47 AM (IST)

Oil prices jumped more than 3% in early Asian trade on Monday, as OPEC+ considers cutting output by more than 1 million barrels a day for its biggest reduction since the pandemic, in a bid to support the market.

Brent crude futures rebounded $2.51, or 3%, to $87.65 a barrel by 0206 GMT, after settling down 0.6% on Friday. U.S. West Texas Intermediate crude was also up 3%, or $2.39, at $81.88 a barrel, after the previous session's loss of 2.1%. Oil prices have dropped for four straight months since June, as COVID-19 lockdowns in China hurt demand, while rising interest rates and a surging U.S. dollar weighed on global financial markets.

To support prices, the Organization of the Petroleum Exporting Countries and their allies is considering an output cut of more than 1 million bpd ahead of Wednesday's meeting, as per OPEC+ sources. This will be the group's second consecutive monthly cut after reducing output by 100,000 bpd last month. While prompt Brent prices could strengthen further in the immediate short term, concerns over a global recession are likely to limit the upside. Also on Friday, China issued its biggest quota for exports of oil products this year and topped up crude import quotas for independent refiners. State and private refiners can export as much as 15 million tonnes of gasoline, diesel, jet fuel and low-sulphur fuel oil, adding much needed supplies into global markets to replace Russian exports the European Union embargoed in February.