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Crude prices rally as top producers mull big output cut

Oil prices jumped more than three percent in Asian trade Monday as reports said OPEC and other top producers considered slashing output.

Reducing the dependence of the global economy on oil is a colossal task. DAVID MCNEW AFP/File

Oil prices jumped more than three percent in Asian trade Monday as reports said OPEC and other top producers considered slashing output.

WTI climbed 3.5 percent to $82.27 and Brent piled on 3.4 percent to $88.01 ahead of a meeting of the group this week in Vienna, with Bloomberg News saying officials were discussing a one-million-barrel-a-day cut in output.

Bloomberg added that the move — which it said delegates to OPEC had not finalised — would be the biggest since the pandemic began, when crude prices collapsed.

Officials will meet on Wednesday.

The jump in prices comes after both main contracts suffered hefty losses in recent months on demand fears caused by an expected recession in major economies, while a strong dollar and China’s economic woes have also weighed on the commodity.

The losses have seen prices hit levels last seen in January, having wiped out all the gains seen in the wake of Russia’s invasion of Ukraine.

Suvro Sarkar, an energy analyst at DBS Bank, expected more gains were likely.

“It’s only going to be a matter of time before oil returns to $100 a barrel, especially with supplies set to tighten toward the end of the year,” he said.

The cut could give central banks another headache as surging energy costs have been a key driver of inflation that has forced officials to hike interest rates, hammering economies around the world.

It would also come after the United States and other countries released millions of barrels from their emergency supplies to tamp down prices.

OANDA’s Edward Moya said: “The slide in oil prices is likely over.

“Energy traders turned pessimistic over the summer given global slowdown fears, but now it seems the risks for oil are to the upside.”

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