Oil Up, but OPEC+ Decision to Restrain Supply Caps Gains

By Gina Lee

Oil prices increased on Tuesday morning in Asia, although they retreated from the peak levels reached during the previous session. Investors were processing the recent decision to maintain current supply restrictions.

As of 10:57 PM ET, oil prices rose by 0.41% to $81.59, remaining above the $80 threshold, while Brent crude increased by 0.28% to $77.84.

During a meeting on Monday, OPEC+ announced that it would stick to its agreement for a gradual increase in oil production. This decision came despite requests from the U.S. and India for a higher output, as the economic recovery from COVID-19 continues, albeit slowly, which has led to an improved outlook for fuel demand.

"The decision will enable us to continue normalizing the market situation," stated Russian Deputy Prime Minister Alexander Novak during the meeting. The cartel is scheduled to reconvene to review production policy on November 4.

Oil prices have surged by over 50% in 2021, contributing to inflationary pressures that are a concern for crude-importing nations, which fear that these pressures might hinder economic recovery.

According to analyst Amarpreet Singh, the OPEC+ decision reflects "a lack of urgency within the group to increase output, despite an expected surplus in 2022 and limited capacity among key producers."

The rise in crude prices overnight seems disproportionate given that the ministers just reaffirmed their previous decisions; however, it illustrates the tightness of the market, the analyst noted.

Investors are now looking forward to further announcements expected later in the day.