NEW YORK (Pakistan Point News / Sputnik - 08th October, 2022) Oil prices jumped double-digits on the week, with benchmark Brent crude nearing $100 a barrel, after a production cut announced by OPEC rejuvenated a market that had seen four straight months of losses.
London-traded Brent crude settled Friday's session up $3.50, or 3.7%, at $97.92. For the week, it rose 11%, after an 11% drop in September and third-quarter loss of 22%.
New York-traded West Texas Intermediate, or WTI, settled the day up $4.19, or 4.7%, at $92.84 per barrel. For the week, the US crude benchmark was up 17%. Prior to this week, WTI had fallen 12.5% in September and 24% in the third quarter.
"OPEC+ has done whatever it takes and is now awaiting to see what the reaction will be from world leaders," said Ed Moya, analyst at online trading platform OANDA.
The "reaction" from the US government, at least, could be to limit the amount of fuel that can be exported out of the United States - in a bid to stop gasoline prices from retracing their mid-June record highs of $5 a gallon. As of Friday, the gasoline price at US pumps averaged around $3.80 per gallon.
OPEC+, which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 oil exporters, partly steered by Russia, announced on Wednesday what was billed as a "deep" production cut of 2 million barrels per day.
But that figure was well below the 3.5-million-barrel daily shortfall in the group's previously announced output target.
What's more, there was no breakdown on where the reductions would come from - i.e. which countries would be cutting and how they would be doing. The alliance had banked on the market to accept its testimony without pushback. To an extent, that's what oil bulls did.
Phil Flynn, an energy analyst at Chicago's Price Futures Group, also said there was justification for the oil market rebound beyond the OPEC+ decision.
"Crude oil supplies are 3% below the five-year average," Flynn said.
If there was something holding the market from going even higher, it had to be the monthly US jobs report released by the Labor Department on Friday.
US employers added 263,000 jobs in September, slightly above economists' expectations, while its jobless rate dipped to 3.5% from August's 3.7% in a continued challenge to the Federal Reserve's fight against inflation, the report showed.
The Dollar rallied for a third straight day on Friday on bets that the Fed might resort to another jumbo-sized rate hike in November based on the latest monthly jobs report. A strong dollar is anathema to dollar-denominated commodities, including crude, as it raises the transaction/acquisition costs for commodity traders using the euro and other currencies.
In its determination to curb inflation hovering at four-decade highs, the Fed has raised US interest rates by 300 basis points this year from a base of just 25, sending the dollar to 20-year highs.
