Oil dips on symbolic OPEC+ output cut

September 06, 2022: Oil prices slipped early on Tuesday, paring the previous session's 3% gain, as an OPEC+ deal to cut output by 100,000 barrels per day in October was seen as a largely symbolic move to stem the market's recent slide.

Brent crude futures fell 33 cents, or 0.3%, to $95.44 a barrel at 0054 GMT.

U.S. West Texas Intermediate (WTI) crude futures inched up from Monday to $89.13 a barrel, and were up $2.26, or 2.6%, from Friday's close. There was no settlement on Monday, the U.S. Labor Day holiday.

The Organization of Petroleum Exporting Countries and allies led by Russia, together called OPEC+, decided to reverse a 100,000 bpd increase for September after top producer Saudi Arabia and other members voiced concern about the slump in prices since June despite tight supply.

Analysts, who had not expected the agreement even after Saudi Arabia had said it wanted to shore up prices, said the cut was mostly symbolic given that OPEC+ has been unable to meet its production targets.

"This move shows they remain serious about supporting prices, despite the fact the cut will have little impact on the supply/demand dynamics in the short term," ANZ Research analysts said in a note.

Further supporting prices, the European Union's foreign policy chief said he was less hopeful about reaching an agreement soon to revive a nuclear deal with Iran, which would delay any return of around 1 million bpd of Iranian crude to the market.

Westpac senior economist Justin Smirk said a return of Iranian oil would probably just offset lost production from Russia, so broader supply is unlikely to change much.

He said OPEC+ should be satisfied that oil is holding around $90 a barrel.

"You've got growth shocks, rate rises and a strong U.S. dollar and prices haven't fallen away in a meaningful sense - reflecting a tight market. I can't see why OPEC would want to change that," Smirk said.

 Reuters