Oil Settles Above $81 as OPEC+ Maintains Output Increase, Reports Reuters

By Laura Sanicola

Oil prices surged to a three-year high on Monday following OPEC+’s confirmation to maintain its current output policy, driven by a rebound in demand for petroleum products. This decision came despite pressures from some nations advocating for a larger increase in production.

The cartel’s choice to continue its gradual output increases led to a significant rise in oil prices, contributing to inflation concerns among consuming countries that worry it could hinder economic recovery from the pandemic.

In July, OPEC+ agreed to raise output by 400,000 barrels per day each month until at least April 2022, aiming to phase out 5.8 million barrels per day of existing production cuts. As a result, prices settled up by $1.98, or 2.5%, reaching $81.26 a barrel. Last week, prices rose by 1.5%, marking a fourth consecutive weekly increase and returning to levels not seen since 2018.

U.S. oil prices also rose, settling up $1.74, or 2.3%, at $77.62 a barrel, their highest since 2014 after a six-week streak of gains.

"The demand outlook and the results from the OPEC meeting have created a bullish sentiment around crude oil," said John Kilduff, a partner at Again Capital LLC in New York.

According to the International Energy Agency, demand for coal and natural gas has surpassed pre-COVID-19 levels, with oil not far behind. Fossil fuels still account for approximately three-quarters of global energy demand, while non-nuclear renewables represent less than 20%.

OPEC+, which comprises the Organization of the Petroleum Exporting Countries and its allies such as Russia, has faced calls from several countries to increase output more significantly as demand has rebounded faster than anticipated in various regions.

Recently, sources within OPEC+ indicated that producers were contemplating an additional output boost beyond previous agreements.

The rally in oil prices has also been driven by a substantial increase in natural gas prices, which have surged by 300%, leading to a shift towards fuel oil and other crude products for electricity generation and industrial purposes.