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OPEC+ agreed to maintain its schedule of gradual monthly oil-production increases, sending crude prices higher.

Ministers ratified the 400,000 barrel-a-day supply hike scheduled for November after a short video conference on Monday, according to a statement from the group. Going into the talks, there had been speculation that they could opt for a larger supply increase in November, but no such proposal was made, delegates said, asking not to be named because the meeting was private.

West Texas Intermediate crude jumped as much as 3.3% to $78.38 a barrel in New York, the highest in almost seven years.

The agreement comes as OPEC+ appears to be very much in control of the oil market. Crude is trading at multiyear highs without prompting a surge in rival supplies. The cartel’s production policy will be the main factor influencing prices in the coming months, according to oil trader Vitol Group.

Saudi Arabia is sitting pretty, with output close to pre-pandemic levels, the highest petroleum revenues since 2018 and its fellow members largely united behind the plan to gradually revive idle production each month. Washington is also satisfied with that pace of supply hikes, according to a U.S. official who asked not to be named.

This means Saudi Arabia is “keen to tweak the current OPEC+ deal of monthly increases as little as possible," said Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects.

OPEC+ ministers will meet again on Nov. 4, according to the statement.

The Organization of Petroleum Exporting Countries and its allies have regained a remarkably stable footing after more than a year of tumult. The internal conflicts brought on by the pandemic -- from a vicious price war between Russia and Saudi Arabia to arguments between Gulf allies over production quotas -- seem like distant memories.

If there is a threat to the delicate balance OPEC+ has achieved, it’s the possibility of spillover from external crises. The shortage of natural gas, which has sent prices of the fuel to the equivalent of $190 a barrel, is spurring a switch to oil products for heating and manufacturing, boosting overall demand.

U.S. oil production is still recovering from Hurricane Ida, which has knocked out a total of almost 35 million barrels after slamming the Gulf of Mexico a month ago -- equivalent to almost two full months of OPEC+ supply increases.

Anxiety among key consuming nations is palpable, with rising prices from energy to food and metals threatening to cause an inflationary surge that complicates current monetary policy.

In conversations with the Saudis in recent days, the U.S. made clear that it wants OPEC+ to remain attentive to any potential changes in the balance between supply and demand, particularly any spillover from natural gas, said the U.S. official. Riyadh and Washington agreed to remain in close contact and continue monitoring the market, the official said.

“Saudi Arabia is keen to cap the upside and downside of the oil market, if needed," said Sen of Energy Aspects.

 

 

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