Oil prices recorded fresh gains on Tuesday after OPEC+ announced a production increase that fell short of market expectations, while speculation about tougher sanctions on Russia further supported the market.
Brent crude climbed 35 cents, or 0.53 per cent, to $66.37 a barrel by 9:05 AM, reported Reuters. At the same time, US West Texas Intermediate (WTI) advanced 32 cents, or 0.51 per cent, to $62.58 a barrel. WTI had resumed trading after the US Labour Day holiday kept the market shut on Monday.
OPEC+ Surprises With Smaller Output Increase
Over the weekend, eight members of the Organisation of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to raise output by just 137,000 barrels per day starting in October. The move contrasts with previous monthly hikes of 555,000 bpd in August and September, and 411,000 bpd in July and June. Analysts had anticipated a more generous increase.
According to Daniel Hynes, senior commodity strategist at ANZ, the October adjustment marks “the reversal of cuts that were set to remain in place until the end of 2026, following the rapid return of the previous tranche of idled barrels over recent months.”
Brokerage Haitong Securities said that despite the slower pace, the faster-than-expected ramp-up in OPEC+ supply this year, coupled with weaker-than-hoped demand, has left oversupply concerns firmly at the heart of crude pricing.
Sanctions Fears Keep Supply in Focus
Market sentiment was further lifted by geopolitical developments linked to Russia’s war in Ukraine. After Moscow carried out its largest aerial assault on Kyiv since the conflict began, speculation grew around Washington and Brussels imposing tighter sanctions.
US President Donald Trump signalled that his administration was ready to move into a “second phase” of restrictions. Meanwhile, senior European Union sanctions officials travelled to Washington to coordinate what could become the first joint transatlantic action on Russia since Trump’s return to office.
Analysts noted that further sanctions would curtail Russia’s oil exports to global markets, thereby tightening supplies and underpinning crude prices.
Focus Turns to Fed and Demand Outlook
In addition to supply concerns, investors are watching closely for signals from the US Federal Reserve. The central bank’s Federal Open Market Committee is set to meet next week, with traders currently pricing in an 89.4 per cent likelihood of a quarter-point rate cut.
Lower interest rates typically reduce borrowing costs, stimulate growth, and drive demand for commodities such as oil. Should the Fed ease monetary policy, it could provide further support for crude consumption even as supply dynamics remain volatile.
With geopolitical uncertainty rising and OPEC+ signalling restraint in output increases, energy markets are braced for continued turbulence in the weeks ahead.
