NEW YORK -Oil prices soared more than $3 a barrel on Tuesday after Saudi Arabia floated the idea of OPEC+ output cuts to support prices and with the prospect of a drop in U.S. crude inventories.
The Saudi energy minister said OPEC+ had the means to deal with challenges including cutting production, state news agency SPA said on Monday, citing comments Abdulaziz bin Salman made to Bloomberg.
Global benchmark Brent crude gained $3.41, or 3.5 percent, to $99.88 a barrel by 10:53 a.m. EDT (1453 GMT). U.S. West Texas Intermediate crude rose $3.74, or 4.1 percent, to $94.10.
“Much of the impetus behind today’s strength is being driven by comments out of Saudi Arabia alluding to a possible output cut in an attempt to ‘stabilize’ the market,” said Jim Ritterbusch of oil trading advisory firm Ritterbusch and Associates. “Of course, from the Saudis perspective, stable prices equal high prices and instability equals low prices.”
In the comments reported on Monday, the Saudi minister said the paper and physical oil markets had become “disconnected”.
However, nine OPEC sources told Reuters on Tuesday that OPEC+ production cuts may not be imminent and would coincide with the return of Iran to oil markets should Tehran clinch a nuclear deal with the West.
A senior U.S. official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.
Oil has soared in 2022, coming close in March to an all-time high of $147 after Russia’s invasion of Ukraine exacerbated supply concerns. Fears about a global recession, rising inflation and weaker demand have since weighed on prices.
While the price of Brent futures has fallen sharply from this year’s high, the market structure and price differentials in the physical oil market still point to supply tightness.
Underlining tight supply, the latest weekly reports of U.S. inventories are expected to show a decline of 1.5 million barrels in crude stocks. The first of this week’s two reports is out at 2030 GMT from the American Petroleum Institute.