Oil Sets First Monthly Gain Since May After OPEC+ Cuts
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(Bloomberg) -- Oil posted its first monthly gain in five months, propelled by the biggest OPEC+ output cut since the pandemic.
West Texas Intermediate futures fell during the session to settle near $86 a barrel but posted an 8.9% monthly gain in October. OPEC+ said it would curb production by 2 million barrels a day from November, complicating an already uncertain period for oil supply with the European Union set to implement sanctions on Russia in December.
Crude’s rally was capped by headwinds that continue to come out of China. Earlier on Monday, Chinese government figures showed factory and services activity contracted in October. The nation’s Covid Zero policy and an ongoing slump in the property market have weighed heavily on the nation’s economy this year. Vitol Group, the world’s biggest independent oil trader, also noted the company is seeing signs of oil demand destruction.
Oil has shed a about a quarter of its value since June as concerns over a global economic slowdown and tight monetary policy threatened to curtail demand. Investors will be watching interest-rate decisions from central banks including the Federal Reserve this week. The dollar has retreated from a record high even as the Fed kept hiking rates to tame inflation, aiding crude as it makes commodities priced in the currency cheaper for most buyers.
“It remains painful, it remains difficult for many countries” after the surge in energy prices earlier this year, Vitol’s Chief Executive Officer Russell Hardy said in an interview with Bloomberg Television in Abu Dhabi on Monday. “As a result, we’re going to continue to see demand destruction for another few months.”
Monday is the first day of the Adipec oil and gas conference in Abu Dhabi. Eni SpA Chief Executive Officer Claudio Descalzi warned that Europe will have to rely on the US to make up for the loss of Russian oil supplies from next year. At the same time, President Joe Biden’s energy envoy said current US investment in new energy supply is not adequate.
Meanwhile, OPEC held firm to projections that global oil demand will keep growing for another decade, and said it would be dangerous to abandon fossil fuels. World oil consumption will climb by 13% to reach 109.5 million barrels a day in 2035 and hold around this level for another decade, the Organization of Petroleum Exporting Countries said in its annual World Oil Outlook.
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(Corrects size and scope in lede to say first gain in five months)
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