Oil prices seek direction ahead of OPEC+ meeting

Most experts assume that the OPEC+ is likely to keep its current output policy unchanged during its meeting on Wednesday and continue its planned modest production increase.

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Members of the OPEC+ grouping will meet on September 1 to discuss an agreed increase of 400,000 barrels per day (b/d) for the next few months.

Earlier, US President Joe Biden's administration has urged OPEC and its allies to increase the production of oil in order to cap rising gasoline prices that are considered an obstacle for the global economic recovery. However, representatives of the oil-producing alliance said that the recent rise in global oil prices was temporary and was mainly driven by severe weather conditions and a shutdown of oil production in the Gulf of Mexico last weekend.

Some sources from the OPEC+ say that current oil prices around $70 are completely normal and assume that the cartel will continue to work as planned with an output increase of 400,000 bpd.

However, some analysts think that the outcome of the September meeting may be unexpected for the crude market and may become a much bigger shock for oil than the recent hurricane.

On Sunday, more than 90% (1.6 million barrels per day) of the Gulf of Mexico's oil production was shut down as Hurricane Ida hit the coastline. However, this is hardly critical for the global oil market since the season of storms in this area is a common event. Usually, oil production is put on hold for a couple of days until the storm calms down. Hurricane Ida, which hit the region on Sunday, weakened the next day and continues to gradually subside. Analysts predict that oil prices will soon rally.

At the same time, experts see the upcoming meeting of the alliance as a more significant factor for crude prices in the short term than the recent disruption caused by Ida.

Analysts believe that if the cartel postpones a 400,000 output increase amid the pressure from the COVID-19 pandemic, crude prices could jump to $74-78 per barrel in the very near future.

The material has been provided by InstaForex Company - www.instaforex.com

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