Oil prices continued their rally on Tuesday (September 9), driven by the latest smaller-than-anticipated increase in OPEC+ oil production, expectations that China will continue to hoard oil, and concerns over potential new sanctions against Russia.

The eight-member Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed on Sunday to increase production starting in October by 137,000 barrels per day, down from the roughly 550,000 barrels per day they made in September and August.

Brent crude rose 53 cents, or 0.8%, to $66.55 a barrel at 12:00 GMT, while U.S. West Texas Intermediate crude rose 54 cents, or 0.9%, to $62.80. "Prices remain subdued amid speculation that production will not rise by the amount authorized by the eight members, and furthermore, the fact that China has already purchased around 0.5 million barrels per day for stockpiling," said Ole Hansen of Saxo Bank.

China's oil stockpiling, which has helped absorb this year's overproduction, is likely to continue at the same level into 2026, said the chief strategist at commodity trading firm Gunvor on Monday. Crude oil is also supported by the reduction in the amount of unused production capacity within OPEC+, said Giovanni Staunovo of UBS. The decline in spare capacity limits the group's ability to cope with sudden supply shocks and tends to support prices.

"The realization that the OPEC+ supply increase in October could reach 60,000-70,000 barrels per day is one factor, another is that OPEC+'s spare capacity is much smaller than many had expected," he said, explaining the rally. Speculation of further sanctions against Russia after the country's largest airstrike in Ukraine set fire to a government building in Kyiv also supported prices. US President Donald Trump has said he is ready to move to a second phase of restrictions.

Further sanctions against Russia would reduce its oil supply to the global market, which could push oil prices higher. Also in focus are expectations that the US Federal Reserve, which meets next week, will cut interest rates. Lower interest rates reduce consumer borrowing costs and can boost economic growth and oil demand. (alg)

Source: Reuters