Oil Prices Rise on Potential OPEC+ Supply Cuts

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
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Oil Prices Rise on Potential OPEC+ Supply Cuts

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson

Oil prices rose on Thursday on mounting supply tightness concerns amid disruptions to Russian exports, the potential for major producers to cut output, and the partial shutdown of a US refinery.

Brent crude rose 59 cents, or 0.6%, to $101.81 a barrel by 0400 GMT, while US West Texas Intermediate crude was up 42 cents, or 0.4%, at $95.31 a barrel, Reuters reported.

Both crude oil benchmark contracts touched three-week highs on Wednesday after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will cut production to support prices.

Also, discussions on an agreement on Iran's nuclear program remain stalled, calling into question any resumption of its exports.

"Brent crude oil prices rebounded above the $100/barrel mark following Saudi officials showing willingness to defend prices via an OPEC+ production cut if necessary," Citi analysts said in a note.

However, there is still uncertainty ahead for OPEC+ to justify an output reduction amid ongoing negotiations around the Iranian nuclear deal, and a deteriorating macroeconomic picture as the energy crunch gets worse, the Citi analysts added.

In the United States, the world's biggest oil consumer, BP reported shutting some units its Whiting, Indiana, refinery after an electrical fire on Wednesday. The 430,000 barrel-per-day plant is a key supplier of fuels to the central US and the city of Chicago.

Talks between the European Union, the US and Iran to revive the 2015 nuclear deal are continuing with Iran saying it had received a response from the United States to the EU's "final" text to resurrect the agreement.

OPEC sources told Reuters that any cuts by OPEC+ are likely to coincide with a return of Iranian oil to the market, should Tehran secure a nuclear deal with world powers.

Falling US crude and product stockpiles also added to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to Aug. 19 at 421.7 million barrels, steeper from analysts' expectations in a Reuters poll for a 933,000-barrel drop.

The bullish impact was countered by a drawdown in gasoline inventories that was less than expected, reflecting tepid demand.

US gasoline stocks fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a 1.5 million-barrel drop.

Overall US gasoline demand sunk in the most recent period, leaving the four-week average of daily gasoline product supplied 7% below the year-earlier period.



Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon

The Federal Reserve cut its key interest rate Thursday by a quarter-point in response to the steady decline in the once-high inflation that had angered Americans and helped drive Donald Trump’s presidential election victory this week.
The rate cut follows a larger half-point reduction in September, and it reflects the Fed’s renewed focus on supporting the job market as well as fighting inflation, which now barely exceeds the central bank’s 2% target, The Associated Press reported.
Asked at a news conference how Trump's election might affect the Fed's policymaking, Chair Jerome Powell said that "in the near term, the election will have no effects on our (interest rate) decisions.”
But Trump’s election, beyond its economic consequences, has raised the specter of meddling by the White House in the Fed’s policy decisions. Trump has argued that as president, he should have a voice in the central bank’s interest rate decisions. The Fed has long guarded its role as an independent agency able to make difficult decisions about borrowing rates, free from political interference. Yet in his previous term in the White House, Trump publicly attacked Powell after the Fed raised rates to fight inflation, and he may do so again.
Asked whether he would resign if Trump asked him to, Powell, who will have a year left in his second four-year term as Fed chair when Trump takes office, replied simply, “No.”
And Powell said that in his view, Trump could not fire or demote him: It would “not be permitted under the law,” he said.
Thursday’s Fed rate cut reduced its benchmark rate to about 4.6%, down from a four-decade high of 5.3%. The Fed had kept its rate that high for more than a year to fight the worst inflation streak in four decades. Annual inflation has since fallen from a 9.1% peak in mid-2022 to a 3 1/2-year low of 2.4% in September.
When its latest policy meeting ended Thursday, the Fed issued a statement noting that the "unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”
After their rate cut in September — their first such move in more than four years — the policymakers had projected that they would make further quarter-point cuts in November and December and four more next year. But with the economy now mostly solid and Wall Street anticipating faster growth, larger budget deficits and higher inflation under a Trump presidency, further rate cuts may have become less likely. Rate cuts by the Fed typically lead over time to lower borrowing costs for consumers and businesses.
Powell declined to be pinned down Thursday on whether the Fed would proceed with an additional quarter-point rate cut in December or the four rate cuts its policymakers penciled in for 2025.