Oil pares drop with Opec+ cuts weighed against growth outlook

OIL traded near US$82 a barrel as traders weighed a clouded outlook for global economic growth against the potential for output cuts from the Organization of the Petroleum Exporting Countries and its allies (Opec+).

West Texas Intermediate futures pared an earlier decline to trade little changed. Opec+ is discussing cutting output at a meeting next week, a delegate said, a move that could serve to stem a recent slump in prices. 

While crude is on track for a weekly gain, futures are still heading for the first quarterly decline in more than 2 years as fears of a potential recession hang over the market. The US dollar has spiked this month and is trading near a record, making commodities priced in the US currency less attractive to investors.

At the same time, however, the market’s structure has firmed in recent days, indicating tighter supplies.

“Headwinds continue, and the path will continue to be choppy,” said Keshav Lohiya, founder of consultant Oilytics. “However, backwardation continues to get strong in crude oil and diesel. Either flat price is too cheap or structure is too strong.”

The European Union announced a new round of sanctions against Russia that would ban European companies from shipping oil from Opec+ producers to third countries above an internationally set price cap. Tensions have escalated after natural gas pipelines were damaged in suspected sabotage.

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US crude stockpiles unexpectedly declined last week, while petrol supplies also fell, data from the Energy Information Administration on Wednesday (Sep 28) showed. Inventories at the storage hub at Cushing, Oklahoma, rose. BLOOMBERG