Oil Prices Climb as OPEC Considers Cutting Production

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Spikes in natural gas prices are threatening to throw the world economy into recession, reducing oil demand. Andrey Rudakov/Bloomberg

Oil rose on Monday as members of the Organization of Petroleum Exporting Countries announced a small output cut.

OPEC and allies including Russia said they will reduce output by 100,000 barrels a day in October. Prices have been falling as exports from Russia kept flowing despite the war in Ukraine. At the same time, spikes in natural gas prices as a result of the conflict are threatening to throw the world economy into recession, reducing oil demand.

Brent crude, the international standard, climbed 4% to $96.75 a barrel. West Texas Intermediate, the U.S. benchmark, rose 3.8% to $90.18.

Russia, which has closed down a key natural gas pipeline to Europe indefinitely, was opposed to an OPEC output reduction, The Wall Street Journal reported, citing people familiar with the matter. Saudi Arabia had floated the idea of a cut as prices slipped for a third consecutive month in August.  

The Group of Seven nations— or G-7, comprised of Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S.—last week proposed a plan to put a price cap on oil exports from Russia. Western countries have promised to wean themselves off Russian crude, which has pushed shipments toward Asia, often at a discount.

Russia is concerned that a production cut would signal that global oil supply is greater than demand, weakening its leverage in energy negotiations, according to the Journal.

OPEC just lifted its production target by 100,000 barrels a day after President Joe Biden visited Saudi Arabia over the summer. But oil-pumping countries were struggling to produce enough to meet their quotas even before that.

OPEC produced 43.5 million barrels a day over the past two months.

Write to brian.swint@dowjones.com