By Scott Kanowsky
Investing.com -- OPEC+ has agreed to slash oil output quotas by about 100,000 barrels per day from October, as the producer group looks to bolster prices that have been falling due to worries over a possible global economic slowdown.
The decision from the Organization of the Petroleum Exporting Countries, as well as its allies including Russia, comes despite widespread expectations that it would keep current production levels unchanged.
Some analysts had predicted that OPEC+ would instead wait for the outcome of talks over reviving Iran's 2015 nuclear deal with global powers, arguing that a deal may lead to a lifting of sanctions on Tehran. This would, in turn, allow Iran to raise exports and boost tight oil supplies by an estimated 1M barrels or per day - or about 1% of global demand.
However, Saudi Arabia, the de facto leader of OPEC+, had recently supported the idea of lowering production levels to address what it has reportedly described as exaggerated oil price decreases.
Prices have fallen in the past three months, after touching multi-year highs in March. Fears remain that interest rate rises aimed at tamping down soaring inflation and COVID-19 curbs in parts of China, the world's top crude importer, may slow global growth and potentially cool oil demand.
Also influencing the oil market Monday was the news that Russia has halted indefinitely the supply of gas through the Nord Stream pipeline to Germany, raising concerns of an energy crisis in the eurozone and supporting demand for oil.
Moscow’s move to end gas supplies through this important pipeline came almost immediately after G-7 finance ministers agreed on a plan to impose a price cap on Russian oil exports, aiming to financially weaken President Vladimir Putin's government as it continues its invasion of Ukraine.
But there are doubts about the effectiveness of this plan, given larger buyers such as China, India, and Turkey would need to take part.
As of 08:25 ET (12:25 GMT), U.S. crude futures traded 3.67% higher at $90.06 a barrel, while the Brent contract rose 3.91% to $96.66.
U.S. Gasoline RBOB Futures also climbed 1.45% to $2.4992 a gallon.