Oil rallies on the possibility of OPEC+ cuts

Yahoo Finance's Ines Ferré breaks down the latest moves in the oil market as OPEC+ hits at a production cut.

Video transcript

[AUDIO LOGO]

- But we are watching one sector very closely today, and that is energy, leading the gains across the board in the market, partly because of what we're seeing with oil. Prices there are spiking in a big way today as OPEC Plus reportedly considers the biggest production-- reduction of output since the pandemic ahead of Wednesday's meeting.

Let's bring in Yahoo Finance's Ines Ferré for a deeper look at this. And, Ines, certainly a lot's gonna be made about the relationship between the Saudis as well as Russia, obviously, leading the way in OPEC Plus as we look ahead to that meeting on Wednesday.

INES FERRE: Yeah, that's right. And if this production cut takes place, that would be 1 million barrels per day. And that would be significant-- in fact, the largest production cut since the start of the pandemic. Now, in September, OPEC Plus cut production by 100,000 barrels per day. But that was a small and insignificant amount, and it was largely also seen a bit as a snub towards the Biden administration because the Biden administration has been asking for a production increase so that oil prices would come down.

Saudi Arabia has said in the past that oil prices have been disconnected from where, actually, you have demand and supply. But certainly, this would be significant. And this, as you can see by the price of oil today, just the mere speculation that this could happen is sending oil prices higher right now.

- What does that say, though, about what they see in terms of demand? You know, we talk so much about what's happening out in Russia. But there's also concern about demand coming through from China, especially when the economic outlook there is so uncertain.

INES FERRE: And that will be very significant in this meeting. That will be, actually, an in-person meeting, the first in-person meeting since the pandemic, because the big question marks will be demand going forward, demand from China because of those lockdowns, demand from other countries as central banks are tightening monetary policy.

And the question is, how much demand will there be if these countries are in a recession? And also, what happens to the supply of Russian oil because you're talking about the possibility of price caps on Russian oil, a maritime ban on Russian oil? So a lot of questions that will have a decision this week when the group meets.

- OK, already a big mover in the market today. Ines, thanks so much for that.