The Joint Ministerial Monitoring Committee – an advisory group to the OPEC+ group of oil exporting countries – has recommended abiding by an earlier output agreement, dashing hopes for a significant increase in production in November. If member nations agree – as is expected – the group will continue to increase output in monthly 400,000-barrel-a-day increments, shelving plans for an 800,000 barrel jump.
With energy prices soaring across the board and around the world, the group had come under geopolitical pressure from policymakers in China, Europe and the United States – but it appears that longer-term market considerations won the day.
Cartel forecasts anticipate a rebalancing in the market by late 2022, with output increases aligning with elevated demand to bring prices back under control. According to Amin Nasser, Chief Executive Officer of Saudi Aramco, high prices have forced natural gas-powered electricity plants to switch to oil, temporarily increasing demand by roughly 500,000 barrels a day.
Both Brent and West Texas Intermediate benchmarks are up 1.5 percent on the day. Brent is changing hands for $80 a barrel, while its North American equivalent is trading near $77 – levels not seen since prices collapsed in 2014.
The Canadian dollar is up roughly half a percent from yesterday’s open, while the US dollar is erasing overnight losses. Both currencies stand to benefit from rising prices, with increased export volumes likely to flatter Canada’s terms of trade, and higher inflation pushing US yields upward.
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