Oil futures: Brent up 3% on Nord Stream closure, OPEC+ trims output
Quantum Commodity Intelligence – Crude oil futures Monday rallied after's Friday's decision by the G7 group of nations to impose a price cap on Russian oil exports, which was immediately followed by Moscow announcing that the Nord Stream 1 pipeline would remain offline indefinitely.
Oil markets were further supported after OPEC+ announced Monday a production cut of 100,000 barrels per day in October, reversing 100,000 bpd September increase.
Front-month November ICE Brent futures closed at $95.74/barrel (1735 GMT), compared to the day's high of $96.99/b Friday's settle of $93.02/b.
At the same time October NYMEX WTI was trading $88.83/b, versus Friday's settle of $86.87/b.
Nord Stream orders published by the pipeline's operator Friday had indicated that limited flows would return over the weekend, but following the G7 announcement Gazprom backtracked saying it will keep the pipeline offline indefinitely, blaming an 'oil leak'.
Moscow's move however was largely seen as a retaliation after the G7 announced its price cap on Russian crude starting 5 December and products two months later. While details on the cap are to be worked out later, the policy itself will be enforced via finance, shipping and insurance.
The Nord Stream announcement came after European gas markets had closed Friday, with benchmark TTF prices having retreated sharply over the week.
Dutch TTF futures for Oct22 were up around 14.5% on Monday's close at €246/MWh, but having earlier traded at €290/MWh.
OPEC+
The escalation in concerns over Russian energy supplies, particularly the impact on Europe, overshadow the OPEC+ meeting taking place Monday.
Analysts said before the meeting that the August retreat in prices had largely ruled out the likelihood of further output hikes by the group, while some producers were lobbying for a reduction.
A weekend report in the WSJ said Russia doesn't support an oil-production cut at this time, and it is likely OPEC+ will keep its output steady when it meets Monday, as Moscow maneuvers to thwart Western attempts to limit its oil revenue.
Saudi Arabia, the group's biggest exporter, floated the idea recently that the alliance could consider reducing output, blaming a perceived disconnect between oil futures and fundamentals.
Uncertainty surrounding the Iranian situation was also viewed as a reason for the reversal.
"The whole of the mindset around will there or will there not be Iranian oil in the market is extremely important for OPEC+ to take into account," Mike Muller, head of Asia at Vitol Group, told Sunday's Gulf Intelligence energy markets podcast.
Markets remain cautious however after two of China's biggest cities imposed controls on movement to try to curb outbreaks of Covid-19, fuelling fears over oil demand and the broader economic performance.
Tech hub Shenzhen, home to more than 12 million people, expanded its lockdown measures to six of the city's major districts on Friday.
In Chengdu, a city of over 21 million people, health authorities reported 108 new cases on Saturday – all but five of them symptomatic.
They are among 33 cities in China that have imposed some form of restrictions in hopes of suppressing a new wave of infections, with just over a month to go until the Communist Party's national congress.
