Oil prices surge after OPEC extends output cuts

Oil prices surged on Monday and WTI price rose above 72.0 per barrel. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $72.8 per barrel.

The Organization of Petroleum Exporting Countries (OPEC) announced on Sunday that it would extend its output cuts of 2.2 million barrels per day into December. The organization had already delayed output rises in October due to low demand and weakening oil prices.

The ongoing crisis in the Middle East threatens to disrupt oil distribution. Concerns of a broadening conflict in the Middle East are boosting oil prices. The conflict between Israel and Hamas continues to escalate, threatening to affect oil supply and distribution. 

Israel launched a series of missiles against Iran over the weekend but did not inflict substantial damage. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. On Thursday, however, a report stating that Iran plans an attack against Israel in the coming days from Iraqi soil boosted oil prices. In addition, Iran’s Supreme Leader Ayatollah Ali Khamenei threatened Israel with a crushing response on Saturday, which is likely to boost oil prices.

Oil prices are also kept in check by high central banks’ interest rates. The Federal Reserve cut its benchmark interest rate by 50 basis points to a target range of 4.75% to 5.00% in September, after holding interest rates steady since last July.

The US Federal Reserve will announce its interest rate decision on November 7th and is expected to lower interest rates by 25 basis points this week. After the meeting, market participants will focus on Fed Chair Jerome Powell’s press conference for hints on the Fed’s rate outlook.

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Written by:
Myrsini Giannouli

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