Oil prices rise as OPEC+ pauses planned production increase

Oil (BZ=F, CL=F)

Oil prices rose in early European trading after the world’s largest crude producers agreed to pause planned production increases in the opening months of next year, in a move aimed at easing fears of a market glut.

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Brent crude futures rose 0.6% to $65.14 per barrel at the time of writing, while West Texas Intermediate futures lost 0.8% to $61.28 a barrel.

At a meeting on Sunday, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), led by Saudi Arabia and Russia, agreed to lift exports by 137,000 barrels a day in December before freezing any further increases in January, February and March.

The decision represents a shift in strategy for the eight-member group, which has raised its collective production quota by almost 3 million barrels a day over the past year. The cartel has slowed the pace of expansion in recent months amid growing concerns that a surge in supply could trigger another slump in prices.

The International Energy Agency estimates that global output has reached 108m barrels a day, around 3 million barrels more than current demand. The agency attributed the recent weakness in oil prices to this imbalance.

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However, Suhail Al Mazrouei, the UAE’s energy minister, rejected suggestions that the market was awash with crude. “I’m not going to talk about an oversupply scenario. I can’t see that,” he said in Abu Dhabi. “And I think all of what we are seeing is more demand.”

Oil prices have fallen about 10% over the past three months, pressured by signs of slowing economic activity in major consuming regions and rising stockpiles.

Following the OPEC+ announcement, Morgan Stanley revised its forecast for oil prices upwards. “Even if the OPEC announcement does not change the mechanics of our production outlook, it does send an important signal,” the bank’s analysts said. “With OPEC involvement, volatility is reduced.”

The bank raised its forecast for Brent crude to $60 a barrel for the first half of 2026, up from $57.50 previously.

Gold (GC=F)

Gold prices rose modestly on Monday morning as the US dollar remained steady, just below a three-month high reached the previous week. However, reduced expectations for additional Federal Reserve rate cuts in December and the easing of US-China trade tensions capped any significant upward movement in the precious metal.

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Gold futures rose 1% to $4,036.00 per ounce, while spot gold gained 0.4% to $4,020.57 an ounce, at the time of writing.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was flat at 99.80.

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"It's more of positioning from the U.S. dollar side, given that dollar strength has started to stabilise in today's Asia session, so that has caused a bit of uptick in gold," OANDA senior market analyst Kelvin Wong said.

The US Federal Reserve reduced interest rates by 25 basis points last week, marking the second rate cut this year. However, hawkish comments from Fed Chair Jerome Powell afterwards have tempered expectations for further cuts in 2025.

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Traders now assign a 71% probability to a rate cut in December, down from more than 90% before Powell's remarks, according to CME's FedWatch Tool. Non-yielding gold tends to perform well in low-interest-rate environments and during periods of economic uncertainty.

However, Wong noted that "safe-haven play has been reduced at this point in time, over the de-escalation of US-China trade tensions. It could also be a rotation towards a much more risk-on play in the equities... that is causing lack of (major) upward momentum in gold."

Pound (GBPUSD=X, GBPEUR=X)

The pound was lower against its major peers near its lowest level since April 14, touched on Friday, as UK fiscal anxiety intensified ahead of the autumn budget and markets repriced Bank of England easing risks.

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The pound was down 0.2% against the greenback, trading at $1.3128 and 0.1% versus the euro at €1.1387.

Investor anxiety over the UK's fiscal health intensified following new projections that tax hikes and a decline in business investment would constrain economic growth next year. According to the EY Item Club’s latest health check of the economy, Britain’s GDP growth is now expected to be below 1% in 2026, a downgrade that signals sluggish economic expansion in the year ahead.

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The report suggested that the combination of rising taxes and faltering business investment would place a significant brake on growth, limiting the government's ability to increase tax receipts and reducing Chancellor Rachel Reeves’ fiscal flexibility ahead of her budget speech on 26 November.

With less than four weeks before Reeves unveils her budget, markets are reassessing the outlook for the UK economy, which is facing a tough environment of low growth and rising fiscal pressures. These concerns, coupled with expectations for further Bank of England easing, have added to downward pressure on the pound.

In equities, the FTSE 100 (^FTSE) was up 0.1% on Monday morning, trading at 9,729 points. For more details on market movements, check our live coverage here.

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