Will car fuel get more expensive? Oil prices surge after OPEC+ announces modest production

Oil prices surged approximately 1.5 per cent on Monday following the OPEC+ announcement of a more modest monthly production increase than anticipated. The rise in prices tempered some concerns about supply additions; however, analysts expect near-term profits to be limited by a soft demand outlook. The price of Brent crude rose to 91 cents, or 1.4%, to $65.44 a barrel by 0315 GMT, and the US West Texas Intermediate crude was at $61.77, up 89 cents, or 1.5%

"The price jump has primarily been boosted by OPEC+'s decision for a lower-than-expected production hike next month as the group intended to buffer the recent slump in oil markets," said independent analyst Tina Teng, news agency Reuters reported.

The Organisation of the Petroleum Exporting Countries, including Russia and some other smaller nations, assured on Sunday that it would increase production from November by 137,000 barrels per day (bpd), similar to the modest monthly increase in October, amid continuously rising concerns over a looming supply glut.

Russia supports an increase in oil production

Sources indicated that Russia was supporting an output increase of 137,000 bpd in order to skip pressures due to the rise in prices, but Saudi Arabia would have opted for double, triple or even quadruple to regain market share rapidly.

"OPEC+'s decision to increase production by another 137,000 bpd in November could be manageable in light of rising supply disruptions due to tightening sanctions by the U.S. and Europe against Russia and Iran," ANZ analysts stated in a note on Monday.

"Meanwhile, Ukraine continued to intensify its attacks on Russian energy facilities, targeting the Kirishi refinery, one of Russia's largest refineries, with an annual processing capacity exceeding 20 million tonnes," the analysts added.

Meanwhile, the finance ministers of the Group of Seven (G7) nations announced last week that they would intensify pressure on Russia by targeting buyers who continue to increase imports of Russian oil and those helping to bypass sanctions, in an effort to curb Moscow’s revenue amid the war in Ukraine. Still, analysts believe that weak demand fundamentals in the fourth quarter will likely limit short-term price increases.

Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that in the absence of fresh bullish drivers and with uncertainty clouding the demand outlook, oil prices are expected to remain restrained despite OPEC+ opting for a smaller-than-anticipated output hike.

"The reality is that the market is gradually shifting toward a phase of oversupply, with seasonal demand expected to taper off into winter and macro data offering little upside impulse," she added.