OPEC+ members endorse output cut

OPEC+ members endorse output cut
OPEC+ members endorse output cut

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Jeddah - Yasmine El Tohamy - HOUSTON: Oil prices held steady on Monday in choppy trading as China’s continuation of loose monetary policy offset fears that high inflation and energy costs could drag the global economy into recession.

Brent crude futures were down 2 cents, or 0.02 percent, to $91.67 a barrel by 11:37 a.m. EDT (1537 GMT), recovering from a 6.4 percent fall last week. U.S. West Texas Intermediate crude was up 4 cents, or 0.4 percent, at $85.57 after a 7.6 percent decline last week.

“US inflation remains a front topic and with the Fed set to raise rates at least into next year, there are fears that demand destruction will escalate,” said Dennis Kissler, senior vice president of trading at BOK Financial.

China’s central bank rolled over maturing medium-term policy loans on Monday while keeping its key interest rate unchanged for a second month, in a signal that loose monetary policy would be maintained.

Beijing will also greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil, gas and electricity, a senior National Energy Administration official said on Monday.

China will further increase reserve capacities for key commodities, another state official told a news conference in Beijing.

Chinese trade and third-quarter gross domestic product data, along with September activity data, are due to be released on Tuesday, with quarterly growth possibly rebounding from the previous quarter but annual growth threatening to be China’s worst in almost half a century.

Meanwhile, a strong US dollar and the likelihood of further interest rate increases by the Federal Reserve are helping to contain price gains.

St. Louis Fed President James Bullard on Friday said inflation had become “pernicious” and difficult to arrest, warranting continued “frontloading” through larger rate increases of three-quarters of a percentage point.

Inflation in the US remains stubborn and growth in European Union countries is expected to weaken to 0.5 percent, International Monetary Fund official Gita Gopinath said on Monday.

“It has been another turbulent few weeks in oil markets from global growth concerns to super-sized OPEC+ output cuts and it seems they're yet to fully settle down,” said Craig Erlam, senior markets analyst at OANDA.

“Brent has seen lows of $82 and highs of $98, so perhaps what we’re now seeing is it finding its feet somewhere in the middle.”

Oil supply is likely to remain tight after OPEC and allies including Russia pledged on Oct. 5 to cut output by 2 million barrels per day.

OPEC+ output cuts attracted portfolio investors and funds back to the oil markets with continued heavy buying of crude oil futures and options for a second week after OPEC+ cut its production target more than expected.

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