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Oil Slips as Fears of Imminent OPEC+ Output Cut Fade

A worker walks past a pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergei Karpukhin
A worker walks past a pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergei Karpukhin
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Oil Slips as Fears of Imminent OPEC+ Output Cut Fade

A worker walks past a pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergei Karpukhin
A worker walks past a pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergei Karpukhin

Oil prices fell on Wednesday, taking a breather from a near 4% surge the previous day, on receding fears of an imminent output cut by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+.

Global benchmark Brent crude futures fell 40 cents, or 0.4%, to $99.82 a barrel by 0337 GMT, after rising 3.9% on Tuesday.

The US West Texas Intermediate crude futures contract was down 27 cents, or 0.29%, at $93.47 a barrel, having jumped 3.7% the previous day, Reuters reported.

Both contracts soared on Tuesday after the Saudi energy minister flagged the possibility of supply cuts.

Potential OPEC+ production cuts may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West, nine OPEC sources told Reuters on Tuesday.

A senior US official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.

"Tuesday's rally was overdone as many investors knew it would take several months for Iranian oil to flow into the international market even if an agreement to revive Tehran's 2015 nuclear deal was made, meaning OPEC+ would not trim output so quickly," said Kazuhiko Saito, chief analyst at Fujitomi Securities.

"Still, there is not much room for the market's downside due to robust heating fuel demand for the winter," he said, citing that the recent rally in the US heating oil market and surging natural gas prices boosted expectations for stronger heating oil demand and tighter crude supply.

US gas prices shot above $10 for the first time in about 14 years due to a surge in prices in Europe, where tight supplies persist.

Underlining tight supply, US crude stockpiles fell by about 5.6 million barrels for the week ended Aug. 19., according to market sources citing American Petroleum Institute figures on Tuesday, against analysts' estimate of a drop by 900,000 barrels in a Reuters poll.

But gasoline inventories rose by about 268,000 barrels, while distillate stocks increased by about 1.1 million barrels.

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Bank of England Cuts Main Interest Rate by a Quarter-point to 4.75%

Bank of England Deputy Governor for Monetary Policy Clare Lombardelli, Bank of England Governor Andrew Bailey, The Bank of England's Head of Media and Stakeholder Engagement Katie Martin and Deputy Governor, Markets and Banking, Dave Ramsden hold the central bank's Monetary Policy Report press conference at the Bank of England, in London, on November 7, 2024. HENRY NICHOLLS/Pool via REUTERS
Bank of England Deputy Governor for Monetary Policy Clare Lombardelli, Bank of England Governor Andrew Bailey, The Bank of England's Head of Media and Stakeholder Engagement Katie Martin and Deputy Governor, Markets and Banking, Dave Ramsden hold the central bank's Monetary Policy Report press conference at the Bank of England, in London, on November 7, 2024. HENRY NICHOLLS/Pool via REUTERS
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Bank of England Cuts Main Interest Rate by a Quarter-point to 4.75%

Bank of England Deputy Governor for Monetary Policy Clare Lombardelli, Bank of England Governor Andrew Bailey, The Bank of England's Head of Media and Stakeholder Engagement Katie Martin and Deputy Governor, Markets and Banking, Dave Ramsden hold the central bank's Monetary Policy Report press conference at the Bank of England, in London, on November 7, 2024. HENRY NICHOLLS/Pool via REUTERS
Bank of England Deputy Governor for Monetary Policy Clare Lombardelli, Bank of England Governor Andrew Bailey, The Bank of England's Head of Media and Stakeholder Engagement Katie Martin and Deputy Governor, Markets and Banking, Dave Ramsden hold the central bank's Monetary Policy Report press conference at the Bank of England, in London, on November 7, 2024. HENRY NICHOLLS/Pool via REUTERS

The Bank of England cut its main interest rate by a quarter of a percentage point on Thursday after inflation across the UK fell below its target rate of 2%.
The bank said its rate-setting panel lowered the benchmark rate to 4.75% — its second cut in three months — though its governor Andrew Bailey cautioned that interest rates would not be falling too fast over coming months.
“We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much,” he said. “But if the economy evolves as we expect it’s likely that interest rates will continue to fall gradually from here.”
In the year to September, UK inflation stood at 1.7%, its lowest level since April 2021 and below the central bank’s target rate of 2%, The Associated Press reported.
Central banks worldwide dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs.
As inflation rates have recently fallen from multi-decade highs, the central banks have started cutting interest rates.
Economists have warned that worries about the future path of prices following last week's tax-raising budget from the new Labour government and the economic impact of US President-elect Donald Trump may limit the number of cuts next year.
The decision comes a week after Treasury chief Rachel Reeves announced around 70 billion pounds ($90 billion) of extra spending, funded through increased business taxes and borrowing. Economists think that the splurge, coupled with the prospect of businesses cushioning the tax hikes by raising prices, could lead to higher inflation next year.
The rate decision also comes a day after Trump was declared the winner of the US presidential election. He has indicated that he will cut taxes and introduce tariffs on certain imported goods when he returns to the White House in January. Both policies have the potential to be inflationary both in the US and globally, thereby prompting Bank of England policymakers to keep interest rates higher than initially planned.