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NEW YORK: Oil prices rose on Tuesday on expectations that the Organization of the Petroleum Exporting Countries and its Russian-led allies, also known as OPEC+, could agree to a sharp cut in crude production at its meeting this week, while strong demand and the upcoming sanctions on Russian oil also provided some support for prices.

Brent crude gained $2.73, or 3.1%, to $91.59 a barrel as of 1:35 p.m. EDT

U.S. West Texas Intermediate crude rose $2.76, or 3.3%, to $86.39.

OPEC+ is expected to cut output by more than a million barrels a day at its first in-person meeting since 2020 on Wednesday, OPEC sources say.

Voluntary cuts by individual members could add to that, making it their biggest cut since the start of the COVID-19 pandemic, OPEC sources said.

“We expect a substantial reduction to occur, which will not only help tighten physical fundamentals, but send an important signal to the market,” Fitch Solutions said in a note.

Kuwait’s Petroleum Minister said OPEC+ will make an appropriate decision to secure energy supply and serve the interests of producers and consumers.

Edward Moya, Principal Analyst at OANDA, said: “Despite everything that is happening with the war in Ukraine, OPEC+ has never been stronger and they will do whatever it takes to make sure prices are supported here.”

Production target

OPEC+ boosted output this year after record cuts put in place in 2020 when the pandemic reduced demand.

But in recent months the organization has failed to meet its planned production increases, missing in August by 3.6 million bpd.

The planned production target cut was justified by the sharp decline in oil prices from recent highs, Goldman Sachs said, adding that this bolsters its bullish outlook for oil.

Meanwhile, a senior US Treasury official said the G7 sanctions against Russia would be implemented in three phases, first targeting Russian oil, then diesel, and in a third phase lower-value products. such as naphtha.

Sanctions from the G7 and the EU, which opts for a two-phase ban, are set to begin on December 5.

Swiss lender UBS said that as it approached the end of the year, it had seen several bullish factors that could drive crude prices higher, including “recovery in Chinese demand, further reduction in OPEC+ offer, the end of the US Strategic Petroleum Reserve release and the upcoming EU ban on Russian crude.” exports.”

Major oil traders also said at the European Argus Crude Conference in Geneva on Tuesday that economic headwinds had yet to significantly erode global demand for oil.

“Oil demand…if you look at the latest data, it’s still going strong. We were expecting demand destruction, that hasn’t really happened,” said Frederic Lasserre, global head of research and market analyzes at Gunvor Group.

U.S. crude oil inventories are estimated to have risen by around 2 million barrels in the week to September 30, a preliminary Reuters poll showed on Monday.

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