Oil prices rise on slower OPEC+ output hikes; Russia sanctions in spotlight

Investing.com -- Oil prices rose Monday after the announcement of a relatively modest increase in production by OPEC+, as well as the possibility of more sanctions on Russian crude.

At 07:50 ET (11:50 GMT), Brent oil futures for November rose 2.3% to $67.03 a barrel, while West Texas Intermediate crude futures rose 2.4% to $63.33 a barrel. 

Both benchmarks fell more than 3% last week as a weak U.S. jobs report dimmed the outlook for energy demand.

OPEC+ agrees to smaller output hike

The Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, agreed to raise production in October, but at a substantially smaller pace than that seen earlier this year.

The producer group decided during a Sunday meeting it will raise output by a cumulative 137,000 barrels per day in October, much lower than monthly hikes of about 555,000 bpd and 411,000 bpd in earlier months. 

The cartel’s latest hike comes after it began steadily raising production earlier this year, as leader Saudi Arabia sought to regain market share to offset deteriorating oil prices. 

The cartel said on Sunday that it remained on guard over any further weakening in global demand, especially amid increased signs of cooling U.S. growth and sluggish trends in top importer China. 

Oil markets face a potential supply glut in the northern hemisphere this winter, with U.S. fuel demand seen cooling after the end of the summer season. 

More Russian sanctions?

Crude prices have also received a boost at the start of the new week after U.S. President Donald Trump said on Sunday he is ready to move to a second phase of sanctioning Russia, the closest he has come to suggesting he is on the verge of ramping up sanctions against Moscow over the war in Ukraine.

Russia launched its largest air attack of the Ukraine war over the weekend, setting the main government building on fire in central Kyiv and killing at least four people, Ukrainian officials said.

Trump said on Sunday that individual European leaders would visit the United States on Monday and Tuesday to discuss how to resolve the conflict.

"The rise comes after reports that the European Union is exploring new sanctions on Russian banks and energy companies as part of its latest measures to end the war in Ukraine," said analysts at ING, in a note.

Slowing global demand

The oil benchmarks lost between 3% and 4% last week, amid heightened concerns over slowing global demand.

A bulk of these losses came on Friday following dismal U.S. nonfarm payrolls data, which showed a sustained cooling in the world’s biggest economy. 

While the data did ramp up bets on lower U.S. interest rates, which in turn hurt the dollar, it also raised concerns over weakening growth leading to softer fuel demand.

U.S. inventory data released last week had shown an unexpected build, with local fuel demand seen cooling with the end of the travel-heavy summer season. 

Ambar Warrick contributed to this article