By Ambar Warrick
Investing.com-- British and U.S. oil futures diverged on Tuesday after the OPEC+ said it will trim production levels to offset a drop in prices amid fears of slowing demand and economic growth.
London-traded Brent Oil Futures fell 0.1% to $95.12 a barrel by 20:17 ET (00:17 GMT), while U.S. West Texas Intermediate futures jumped 2.2% to $88.75 a barrel. Both contracts surged nearly 3% on Monday.
The Organization of Petroleum Exporting Countries and its allies led by Russia (OPEC+) said during a meeting on Monday that it will cut output by 100,000 barrels per day (bpd) for October- roughly 0.1% of global demand.
The move comes shortly after the cartel raised supply to pre-COVID levels this year. But fears of slowing economic growth across the globe have battered oil prices in recent months.
Saudi Arabia, which leads OPEC+, had flagged a potential supply cut to offset weakness in prices. The cut was in response to speculation over a renewed nuclear deal between the U.S. and Iran, which is expected to release over 1 million bpd of supply into the market.
Crude prices tumbled between $4 and $7 last week after weak manufacturing data from China, as well as signs of slowing economic growth in the U.S. Expectations of the Iran nuclear deal also rattled prices.
Oil prices are down substantially from 14-year highs hit earlier in the year, as concerns over slowing crude demand offset supply shocks from the Russia-Ukraine conflict.
But prices may be set for more relief, especially as gasoline demand improves in the U.S. An energy crisis in Europe, driven by a gas shortage due to Russia’s shutdown of a major pipeline, is also expected to drive up demand for heating oil in the winter months.
London-traded London Gas Oil Futures surged nearly 3% after Russia’s move.