Oil prices dip as investors brace for OPEC+ output hike

Oil prices dipped on Friday morning, ahead of an anticipated output hike by OPEC and its allies (OPEC+).

Brent crude (BZ=F) futures fell 0.2% to $63.75 per barrel at the time of writing, while West Texas Intermediate futures (CL=F) declined by the same margin to $60.47 a barrel.

OPEC+ is due to meet on Sunday, with reports that the group are set to announce a modest output hike of 137,000 barrels per day (bpd) for December, having decided to increase production in November by the same amount.

ING’s head of commodities strategy Warren Patterson and commodities strategist Ewa Manthey said: “The uncertainty surrounding sanctions on Russia also supports this increase.

“However, the move will only reinforce the bearish outlook for the market, adding to the substantial surplus expected through 2026. Obviously, this is assuming no supply shocks from Russia.”

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The US announced sanctions against two of Russia’s biggest oil companies last week, accusing Moscow of a lack of commitment to the peace process to end its war in Ukraine.

The US Treasury announced sanctions against Rosneft and Lukoil, which it said were aimed at increasing pressure on Russia’s energy sector and impeding its ability raise revenue to fund the war and support its economy.

Oil prices soared following the announcement, on expectations that this could disrupt and tighten supply in the market. However, prices have since declined slightly, amid overriding concerns about declining demand and oversupply.

Gold prices rose on Friday morning, as investors digested the outcome of the meeting between US president Donald Trump and China’s president Xi Jinping in South Korea on Thursday.

Gold futures (GC=F) edged 0.2% higher to $4,022.10 per ounce at the time of writing, while spot gold advanced 0.4% to $4,011.91 an ounce.

The two leaders agreed to a one-year trade truce until November 2026, with the US lowering its tariffs related to fentanyl, while China promised to delay restrictions on rare earth exports.

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Jim Reid, head of macro and thematic research at Deutsche Bank (DBK.DE), said: “Despite this stabilisation, structural differences persist, and it’s easy for there to be some scepticism of the deal’s scope due to the lack of concrete commitments.”

“The sense that we are seeing more of an extended truce rather than a de-escalation was added to by US trade representative [Jamieson] Greer confirming last night that the US will continue a recently opened probe into China’s compliance with the limited trade agreement reached during Trump’s first term.”

The pound was steady against the dollar (GBPUSD=X) on Friday, trading at $1.314 at the time of writing, as investors weighed the latest geopolitical and economic developments.

Matthew Ryan, head of market strategy at global financial services firm Ebury, said: “A combination of budget jitters and rising bets in favour of a December rate cut from the Bank of England have kept sterling firmly on the back foot so far this week, with the pound slumping towards the 1.31 level on the dollar yesterday, and to its lowest level on the euro since May 2023.”

Meanwhile, the US Federal Reserve cut interest rates on Wednesday by 0.25% to a range of 3.75% to 4%. However, Fed chair Jerome Powell said in press conference following the central bank meeting that another rate cut in December is “not a foregone conclusion – far from it.”

“There were strongly differing views about how to proceed in December,” he said.

The dollar rose following Powell’s cautious comments, which reduced expectations of a rate cut in December.

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Francesco Pesole, FX strategist at ING, said: “The dollar found more support yesterday on the tail effect of Fed chair Powell’s hawkish press conference and, more marginally, the US-China trade deal.”

However, he said ING’s short-term “short-term call on the dollar remains more one of ‘lack of direction’ rather than the initiation of a more sustainable rebound”.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, was steady on Friday morning at 99.56.

In other currency moves, the pound dipped 0.1% against the euro (GBPEUR=X) on Friday morning, to trade at €1.1352 at the time of writing.

More broadly, the FTSE 100 (^FTSE) fell 0.4% in early European trading to 9,719 points. For more details on market movements check our live coverage here.

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