Oil settles up after OPEC+ opts for modest output hike

By Georgina McCartney

HOUSTON (Reuters) - Oil prices settled higher on Monday, recovering some of last week's losses, after producer group OPEC+ opted for a modest output hike and investors priced in the possibility of more sanctions on Russian crude.

OPEC+ flagged plans to further increase production from October, but the amount was less than some analysts had anticipated. Reuters reported earlier this month that members were considering another hike.

"The market had run ahead of itself in regard to this OPEC+ increase," said Ole Hansen, head of commodity strategy at Saxo Bank. "Today we're seeing a classic sell the rumour, buy the fact reaction."

Brent crude settled up 52 cents, or 0.79%, to $66.02 a barrel, while U.S. West Texas Intermediate crude settled up 39 cents, or 0.63%, to $62.26 a barrel.

Both benchmarks had risen more than $1 earlier in Monday's session. Prices fell more than 2% on Friday as a weak U.S. jobs report dimmed the outlook for energy demand. They lost more than 3% last week.

OPEC+, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, agreed on Sunday to further raise oil production from October.

Saudi Arabia, the world's top oil exporter, cut the official selling price for the Arab Light crude it sells to Asia a day after OPEC+ producers agreed the output hike.

"Riyadh and its allies signaled a decisive pivot: defending market share now outweighs defending prices," Rystad Energy Chief Economist Claudio Galimberti said in a note on Monday.

"By allowing supply back into a market moving toward surplus, OPEC+ is playing offense, not defense. Traders have been put on notice," he added.

OPEC+ has been increasing production since April after years of cuts aimed at supporting the oil market. The latest decision comes despite a likely looming oil glut in the Northern Hemisphere winter months.

The eight members of OPEC+ will lift production from October by 137,000 barrels per day. That, however, is much lower than increases of about 555,000 bpd for September and August and 411,000 bpd in July and June.

The impact of the latest increase is expected to be relatively low, because some members have been over-producing. So the higher output level would likely include barrels that are already in the market, analysts said.

OPEC on Monday released a compensation schedule from six of its members covering the period from last month and until June next year to make up for producing above their targets.

The schedule indicates that in total the members need to deliver monthly cuts ranging from 190,000 bpd to 829,000 bpd to comply with output targets.

MORE RUSSIA SANCTIONS?

U.S. President Donald Trump said on Sunday he is ready to move to a second phase of sanctioning Russia, the closest he has come to suggesting he is on the verge of ramping up sanctions against Moscow or its oil buyers over the war in Ukraine.

"Expectations of tighter supply from potential new U.S. sanctions on Russia are also lending support," said Toshitaka Tazawa, an analyst at Fujitomi Securities.

New sanctions on buyers of Russian oil could disrupt crude flows, energy trader Gunvor's global head of research and analysis, Frederic Lasserre, said on Monday.

Russia launched its largest air attack of the Ukraine war over the weekend, setting the main government building on fire in central Kyiv and killing at least four people, Ukrainian officials said.

Trump said on Sunday that individual European leaders would visit the United States on Monday and Tuesday to discuss how to resolve the conflict.

In a note over the weekend, Goldman Sachs said it expects a slightly larger oil surplus in 2026 as supply upgrades in the Americas outweigh a downgrade to Russian supply and stronger global demand. It left its Brent/WTI price forecast unchanged for 2025 and projected the 2026 average at $56/$52 a barrel.

(Reporting by Georgina McCartney in Houston, Anna Hirtenstein in London. Additional reporting by Yuka Obayashi; Editing by Louise Heavens, Susan Fenton, Nia Williams and Bill Berkrot)