Oil Falls Ahead of OPEC+ Meeting With Supply in Focus

Futures in New York fell 0.6% while international benchmark Brent also declined. OPEC and its allies will meet Monday, with a planned production hike of more than 400,000 barrels a day seen as under consideration, RBC Capital Markets analyst Helima Croft wrote in a note.

Investor focus also continues to be on crude demand after China ordered its state-owned companies to secure energy supplies for winter at all costs as the country struggles with a deepening power crisis. At the same time, the U.S. issued monthly consumption figures for July that were lower than expectations.

The order from Beijing is the latest sign that rising energy prices are becoming a political issues, after the White House Thursday said crude’s rally was a concern.

It is likely to add more upward pressure to already elevated coal and liquefied natural gas prices, as well as oil products including fuel oil, diesel and propane, which can be used for electricity generation or to power small generators. That’s bolstering the scrutiny on OPEC+’s next move when it meets Monday.

“Oil and gas prices are increasingly becoming politicized, especially with the OPEC meeting on Monday,” said Keshav Lohiya, founder of researcher Oilytics. “It is surprising China gave the public order to secure supplies when it has tried to talk the commodity markets down from reduced crude imports to SPR releases of oil and metals.”

With the world racing to secure power supplies ahead of winter, diesel markets are surging. Profits to turn a barrel of crude into the fuel — often used in heating — in both the U.S. and Europe are the highest since April 2020.

World oil consumption could be boosted by an additional 370,000 barrels a day — roughly 6% of expected growth — if gas prices stay high for an extended period, according to an internal OPEC document seen by Bloomberg. International oil supply, meanwhile, is expected to be 1.2 million barrels a day below consumption this month and 900,000 barrels a day in deficit in November, according to the document.