Oil Steadies Near Seven-Year High as OPEC+ Sticks to Output Plan

Oil steadied in Asian trading after rallying to the highest level since 2014 following a decision by OPEC+ to maintain its planned gradual increase of supply, despite the market facing an energy crunch.

Futures in New York traded near $78 a barrel after surging 2.3% on Monday as the alliance stuck with a 400,000 barrel-a-day boost for November. Some market watchers were expecting the group, led by Saudi Arabia and Russia, to increase production by more than planned due to a spike in natural gas prices that’s led to greater demand for oil products ahead of winter.

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Crude markets have tightened as economies rebounded from the pandemic, and modeling from OPEC is predicting a supply deficit over the next two months. Goldman Sachs Group Inc (NYSE:GS). sees an extra 650,000 barrels a day of demand later this year as utilities wrestling with high natural gas prices switch to oil, while Saudi Aramco (SE:2222) said the gas crisis was already boosting crude consumption.

The prompt timespread for Brent was 80 cents a barrel in backwardation — a bullish market structure where near-dated contracts are more expensive than later-dated ones. That compares with 74 cents a week earlier.

The OPEC+ decision “will allow us to continue normalize the market situation,” Russian Deputy Prime Minister Alexander Novak said during a speech at the meeting, part of which was broadcast by Rossiya 24 state TV channel. Ministers will meet again to discuss production policy on Nov. 4.