Oil jumps 2% as OPEC agree to smaller output hike for October, sanction threats looms

Oil prices rose 2% on Monday after the Organization of the Petroleum Exporting Countries and allies announced a smaller hike in production for October. 

Concerns of supply disruptions from possible sanctions against Russian oil exports also buoyed sentiments in the market. 

At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $63.13 per barrel, up 2% from the previous close.

Brent crude oil on the Intercontinental Exchange was also up 2% at $66.80 per barrel. 

Oil benchmarks dropped over 2% on Friday and more than 3% last week, driven by a weak US jobs report that negatively impacted the outlook for energy demand.

OPEC’s decision

The eight members of the OPEC+ alliance — Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman — met virtually on Sunday to agree on an output hike for October. 

The market chatter was for a much larger increase in oil production by the eight members. 

OPEC+ is set to increase oil production by 137,000 barrels per day (bpd) starting in October.

This comes after consistent production increases since April, following years of cuts designed to bolster the oil market. 

The latest increase, however, is significantly lower than previous adjustments, which saw increases of approximately 555,000 bpd in September and August, and 411,000 bpd in July and June.

This decision is made despite the anticipated oil surplus in the Northern Hemisphere during the winter months.

“OPEC+ agreed to increase output by 137k b/d in October, much lower than the hikes implemented over the previous months,” Warren Patterson, head of commodities strategy at ING Group, said in a note. 

Analysts predict a minimal impact from this increase, as some members have been overproducing, meaning the higher output level would likely incorporate barrels already present in the market.

Fresh sanctions

Reports suggest that the European Union was planning fresh sanctions against Russian banks and energy companies as part of its latest measures to end the war in Ukraine. 

Meanwhile, US President Donald Trump indicated on Sunday his readiness to initiate a second phase of sanctions against Russia. 

This statement marks his strongest suggestion yet that he is close to increasing sanctions on Moscow or its oil importers, due to the conflict in Ukraine.

On Sunday, Russia carried out its most extensive air assault of the Ukraine war, resulting in the main government building in central Kyiv catching fire and claiming the lives of at least four individuals, according to Ukrainian officials.

Additionally, on Sunday, Trump announced that European leaders would visit the United States on Monday and Tuesday to address the conflict.

Goldman Sachs anticipates a slightly larger oil surplus in 2026, driven by increased supply from the Americas that is expected to offset a downgraded supply from Russia and stronger global demand. 

This projection, shared in a weekend note, leaves their 2025 Brent/WTI price forecast unchanged, while the 2026 average is projected at $56/$52 a barrel.

Trade data

China's crude oil imports rebounded in August, according to trade data released this morning. 

Crude oil flows increased by 4.9% month-on-month and 0.8% year-on-year, reaching 49.5 million metric tons (approximately 11.65 million barrels per day). 

This rise is attributed to continued high operating rates at both state-owned and independent refineries.

Cumulative imports for the year to date have increased by 2.5% year-over-year.

“Imports have been stronger as the maintenance season is finally over and refiners took even more cargoes in August,” Patterson said.

According to Baker Hughes data, the number of active oil rigs in the US increased by two last week, reaching a total of 414.

This marks the second consecutive week of expansion for the US oil rig count.