(Bloomberg) -- Oil climbed after OPEC+ agreed to push back its December production increase and Iran outlined a possible response to Israel’s recent bombardment. Traders also braced for jumpy trading ahead of the US election.
West Texas Intermediate rose 2.8% to settle near $71.50 a barrel, the biggest gain since early October, while Brent advanced 2.7% to settle above $75.
Saudi Arabia and its allies delayed a series of monthly output hikes until early next year, a move anticipated by many traders amid an impending glut. Looking ahead, Macquarie analysts said the delay “casts doubt” on 2025 supply hikes, quelling speculation of a potential price war.
If prices don’t get a boost from surprisingly strong China demand or weaker-than-expected non-OPEC production, “we can look forward to OPEC continuing to push back unwinding, in dribs and drabs,” said Stewart Glickman, an analyst at CFRA Research.
Meanwhile, Iran escalated its rhetoric, with supreme leader Ayatollah Ali Khamenei warning Saturday of a “crushing response” to Israel’s recent strike. The Wall Street Journal reported that Tehran told allies an attack would come after Tuesday’s US presidential vote, but before January’s inauguration, and it wouldn’t be limited to missiles and drones as two previous strikes were. Israel has kept up its campaign against Iranian proxies, striking Hezbollah intelligence sites in Damascus.
The US election tomorrow is also contributing to heightened market volatility. The dollar weakened — offering another support to crude prices — after new polling suggested traders were underestimating the prospect of a win for Democrat Kamala Harris, leading investors to unwind their so-called “Trump Trade” bets.
“The challenge for oil markets is that they’re getting caught up in the election uncertainty,” said Rob Haworth, senior investment strategist at US Bank. The event “isn’t necessarily driving prices, but it is driving investor sentiment.”
With the OPEC+ decision helping to crystallize near-term supply outlook, traders will be honing in on a looming Fed rate decision and stockpile data this week to get a better sense of US demand, Haworth said.
In the Americas, Tropical Storm Rafael threatens to menace offshore oil and natural gas production areas in the western Gulf of Mexico, and Shell said it would evacuate some non-essential personnel in the area.
Oil prices have become increasingly volatile, with concerns of an oversupply next year and lackluster demand in top importer China vying against unrest in the Middle East, which supplies about a third of the world’s crude.
The oil market has a number of other key events on the horizon this week, such as a meeting of China’s top legislative body. Saudi Aramco is scheduled to release its official prices for December, with the producer expected to lower its rates for Asia, according to a Bloomberg survey.
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--With assistance from Grant Smith.
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