Sunday Southerner
Oil jumps 2%, settles at 6-month highs on fears of escalation in Iran
OPEC+ oil-producing countries have agreed in principle to keep their December oil output targets steady at a meeting on Sunday, three people with knowledge of the matter told Reuters, in line with expectations that further output policy adjustments won’t occur until next year.
According to a Reuters report, Sunday’s online meeting of seven core OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman — comes as Gulf members have been boosting exports that have been disrupted for months by the Iran war. Most, however, are still pumping well below their output targets.
OPEC+ comprises the Organization of the Petroleum Exporting Countries and allies including Russia.
In September, OPEC+ completed the phased rollback of a 1.65 million-barrel-per-day supply cut first agreed in 2023. Disruption caused by the Iran war has meant Gulf producers are falling below their quotas.
Reuters reported in July that OPEC+ was likely to make no changes to its targets during the fourth quarter as it turns its focus to 2027 quota negotiations.
The group still has one more layer of production cuts of about 2 million bpd covering most members through the end of 2026.
OPEC+ needs to finalise a review of members’ production capacity during the fourth quarter before setting the 2027 baselines that will determine future quotas and shape plans to unwind those cuts, sources have said.
On Sunday, Oil prices jumped more than 2% on Friday and settled at their highest levels since the end of April, as traders braced for a potential escalation in the Iran war after the US midterm elections, with an attack on a tanker in the Strait of Hormuz highlighting supply risks.
Brent crude futures for December, which expired on Friday, settled up $2.76, or 2.4%, at $117.64 a barrel, after touching a high of $118. The more active January contract gained $2.63 to $113.43.
US West Texas Intermediate (WTI) crude futures settled $2.12, or 2.08%, higher at $104.12.
For the month, Brent finished 13.6% higher, while WTI rose 15.2%.
“Traders will remain focused on oil flows out of the Middle East and the likely escalation by US and allied forces,” said Dennis Kissler, senior vice president of trading at BOK Financial.
On Friday, a tanker in the Strait of Hormuz was hit by explosive devices attached by a small boat, said the UKMTO, the British maritime security service. It was not immediately clear who was behind the attack in the strait, the key sea outlet for Gulf crude and fuel supplies.
