Oil prices increased on Monday following a decision by OPEC+ countries to extend production cuts and delay output increases, with additional support from the anticipation around the upcoming US presidential elections.
The international oil benchmark of Brent crude increased 2.2% to $74.42 per barrel at 11.28 am local time (0828 GMT), up from the previous session’s close of $72.84.
The US benchmark West Texas Intermediate also rose by 2.4% to $70.77 per barrel, compared to $69.10 at the prior session’s close.
The OPEC+ group which include the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, announced on Sunday a decision to continue production cuts of 2.2 million barrels per day through December.
The group was expected to increase production by 180,000 barrels daily from December. The reduction in oil supply by major producers supported prices upwards.
Moreover, the dollar index declined ahead of the Nov. 5 presidential elections in the US, the world’s largest oil-consuming country. The weakening of the US dollar against other major currencies contributed to higher oil prices.
The weaker dollar is likely to drive up demand by making oil more affordable for buyers using other currencies. The US dollar index, which tracks the dollar’s value against a basket of other currencies, dropped 0.54% to 103.637.
According to the latest polls, former US President and Republican presidential candidate Donald Trump and Democratic candidate Kamala Harris are in a tight race.
Meanwhile, market players also eye the US Federal Reserve’s (Fed) interest rate decision scheduled on Thursday.
According to the analysts, the expectations for the Fed’s interest rate cuts remain strong, while pricing in the money markets is certain that the bank will cut the policy rate by 25 basis points at next week’s meeting. A December Fed rate cut is heavily implied, with a 78% probability priced into the market.
Reports that Iran is preparing to retaliate for the October 26 Israeli attack continue to fuel oil prices. Israeli media reported that Iran was ‘preparing for a major retaliation from Iraq within a few days’ in response to Tel Aviv’s latest attack.
