Oil futures: Prices up over 2% after OPEC dismisses output increase report

Quantum Commodity Intelligence - Crude oil futures Tuesday were trading higher as markets rallied following the previous session's huge price swings after a report in the WSJ that Saudi Arabia was pushing for a further output cut, followed by a swift denial.

Front-month January ICE Brent futures were trading at $89.46/b (1730 GMT), compared to Monday's settle of $87.45/b.  

At the same time, Jan23 NYMEX WTI was trading $81.94/b versus Monday's settle of $80.04/b.

Crude ended the previous session largely flat on the day, having at one point slumped by more than 5%, testing 10-month lows, on a report saying Saudi Arabia was set to propose a 500,000 bpd output increase when OPEC meets in early December.

"It would be an odd move from OPEC+ to increase supply when there is still so much demand uncertainty, and while there is still so little clarity on what the full impact of the EU ban on Russian oil will be," said Warren Patterson, head of ING's commodity research.

"We believe it is unlikely that the group makes any further changes to its deal after reducing production targets by 2 million bpd at their meeting in October," added Patterson.

Saudi quickly quashed Monday's report, which was published on the newspaper's website and widely distributed via social media.

"It is well known, and no secret, that OPEC+ does not discuss any decisions ahead of its meetings," said Prince Abdulaziz bin Salman, which was widely viewed as a flat rejection of the report.

The UAE also dismissed any suggestion that it was engaging in talks with other OPEC+ members to amend the latest agreement, adding that it is valid until the end of 2023.

"We remain committed to OPEC+ aim to balance the oil market and will support any decision to achieve that goal," energy minister Suhail Mohamed Al Mazrouei said, while several other OPEC nations made similar comments.

Looming EU sanctions on Russia and the G7 price cap, including details set to be finalized this week, lent some support, particularly with Europe reportedly stocking up on Russian diesel ahead of the ban.  

On the downside, China reported 28,000 new COVID-19 infections on Monday, while restrictions were reportedly impacting up to 20% of China's economy, in turn weighing on oil demand growth prospects.