Oil rises on tighter supply concerns despite smaller OPEC+ production increase

SINGAPORE: Oil prices inched higher on Tuesday as traders reacted to a smaller-than-expected production increase from OPEC+, while concerns over possible new sanctions on Russia added to supply fears.

Brent crude gained 22 cents, or 0.33 percent, to trade at $66.24 a barrel by 0005 GMT. US West Texas Intermediate (WTI) crude rose 24 cents, or 0.39 percent, to $62.50 a barrel.

OPEC+ raises output cautiously

The Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed on Sunday to raise production by 137,000 barrels per day (bpd) from October. The move marked a significant slowdown compared to earlier increases of 555,000 bpd in August and September, and 411,000 bpd in July and June.

Analysts had expected a larger hike, which made the decision supportive for prices. “The October move marks the reversal of cuts that were set to remain in place until the end of 2026, following the rapid return of the previous tranche of idled barrels over recent months,” said Daniel Hynes, senior commodity strategist at ANZ, in a note to clients.

Russia sanctions in focus

Market sentiment was also lifted by speculation of fresh sanctions on Russia after the country carried out its biggest airstrike on Ukraine since the start of the conflict, igniting a government building in Kyiv.

US President Donald Trump signalled readiness to move towards a second phase of restrictions. Meanwhile, the European Union’s top sanctions official arrived in Washington with a team of experts to discuss what could become the first joint transatlantic sanctions effort against Moscow since Trump returned to the White House.

Any tightening of sanctions on Russia would likely restrict its crude supply to global markets, raising the prospect of higher prices.

US interest rate outlook

Traders are also keeping an eye on monetary policy in the United States. The Federal Reserve’s policy-setting committee meets next week, with markets pricing in an 89.4 percent chance of a quarter-point interest rate cut. Lower borrowing costs are generally seen as positive for economic growth, which can drive demand for oil.