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For the first time in a year, OPEC+ agreed to make a token oil supply cut for October, trying to stabilise international markets after a faltering economic backdrop triggered the longest price rout in two years.

At a meeting held today, OPEC decided to reduce production by 100,000 barrels a day next month, taking supplies back to August levels, the group said in a statement.

Noting the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning, the OPEC and non-OPEC Ministerial Meeting highlighted that it would be willing to call another ministerial meeting at any time if needed to address market developments. 

Its next scheduled talks will be on 5 October.

Meanwhile, India is also the world's third largest importer of oil. A rise in oil prices increases imported inflation.

Oil prices jump $3

Oil prices rose more than $2 a barrel on Monday, extending gains as OPEC+ producers agreed to cut oil output targets by 100,000 bpd in October, according to a source.

Brent crude futures futures for November delivery rose $3.57 to $96.59 a barrel, a 3.8% gain, by 7:24 am ET (12:24 GMT).

US West Texas Intermediate crude was up $2.13, or 2.5%, at $89 after a 0.3% gain in the previous session.

US markets are closed for a public holiday today.

Benchmark Brent crude oil has dropped to about $95 a barrel from $120 in June on fears of an economic slowdown and recession in the West.

It was also dragged down by a potential supply boost from Iranian crude returning to the market if Tehran is able to revive its 2015 nuclear deal with global powers.

Commenting on the oil production cut, Megh Mody, Commodities and Currencies Research Analyst at Prabhudas Lilladher, said, “OPEC and its allies led by Russia on Monday agreed a small oil production cut to bolster prices that have slid on fears of an economic slowdown."

"The oil producers will reduce output by 100,000 barrels per day (bpd), amounting to only 0.1% of global demand, for October and also agreed they could meet any time to adjust production before the next scheduled meeting on Oct 5. Prices will not be impacted as there will be minor upmove. This production cut can be a breather for process due to weak macro sentiment, renewed china lockdown, uncertainty over potential US- Iran deal," Mody added. 

According to a Wall Street Journal report, Russia, the world's second-largest oil producer and a key OPEC+ member, does not support a production cut at this time and the producer group is likely to decide to keep output steady.

Oil prices have fallen in the past three months from multi-year highs hit in March, pressured by concerns that interest rate increases and coronavirus restrictions in parts of China could slow global economic growth and dent oil demand.

Lockdown measures in China's southern technology hub of Shenzhen eased on Monday as new infections showed signs of stabilising though the city remains on high vigilance.

Meanwhile, talks to revive the West's 2015 nuclear deal with Iran, potentially providing a supply boost from Iranian crude returning to the market, has hit a new snag.

The White House on Friday rejected Iran's call for a deal to be linked with closure of investigations by the UN nuclear watchdog, a Western diplomat said.

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