Brent, the benchmark for two thirds of the world’s oil, was trading 3.56 per cent higher at $96.33 a barrel at 3.44pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 3.21 per cent at $89.66 a barrel.
“Today, investors will be closely watching the Opec meeting,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
“Even if the demand side is pushing crude prices lower, Opec wouldn’t let the prices drop too much below the actual levels. Of course, no output cut should send the price of crude back to $85 [per barrel]. Yet, if Opec announces another wave of output restrictions, the price of a barrel could jump back to $100 and above.”
Last month, Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg that Opec and its allies would cut production if required to counter oil price volatility.
The 23-member alliance, led by Saudi Arabia and Russia, has emerged “stronger and more cohesive than ever” amid the “challenging environment”, he said.
“Opec+ has the commitment … and the means within the existing mechanisms of the Declaration of Co-operation to deal with such challenges and provide guidance, including cutting production at any time and in different forms as has been clearly and repeatedly demonstrated in 2020 and 2021.”
The group is "expected to leave output targets unchanged but it is likely that a cut will be at least discussed which, if followed through on, would create more volatility and uncertainty at a time of considerable unease”, said Craig Erlam, senior market analyst for the UK, Europe, the Middle East and Africa at Oanda.
“The economic outlook and potential for a new nuclear deal have weighed on prices recently.”
Oil prices have remained extremely volatile in recent weeks amid Russia's continuing conflict in Ukraine, recessionary fears, rising inflation and the resurgence of Covid-19 restrictions in China.
“Fears that demand will be sharply curtailed because of a recession are the near-term factor weighing on the market,” said Daniel Richards, Mena economist at Emirates NBD.
The International Monetary Fund lowered its 2022 growth forecast for the global economy in July to 3.2 per cent, from its previous forecast of 3.6 per cent in April.
It also issued a warning that if further risks materialise and inflation rises further, global growth could decline to about 2.6 per cent and 2 per cent in 2022 and 2023, respectively, which would put growth in the bottom 10 per cent of outcomes since 1970.
Oil demand concerns have also been exacerbated by sporadic coronavirus lockdowns imposed by China, the world's top oil importer, as part of its “zero-Covid” strategy.
Meanwhile, markets are also awaiting the outcome of talks related to the Iran nuclear deal. If an agreement is reached, it could pave the way for Tehran to add 4 million barrels of crude per day to the market.
While this would not be immediate and could take some time for the oil to reach buyers, it would ease supply concerns.
While the level of the price caps has not been decided as yet, Russian oil sales that do not abide by the cap will be blocked through shipping and insurance.
“The G7 agreed to cap the price of Russian oil by only allowing insurance or shipping if deals for Russian oil come in below the cap. Neither China or India have signed up to support a price cap, still offering scope for Russia to export its crude oil elsewhere,” said Mr Richards.
However, in the short term, the focus remains on Opec+'s strategy, analysts said.
“In terms of the economic calendar, it is going to be mainly about the Opec meeting, and [if] it is a production cut,” said Naeem Aslam, chief market analyst at AvaTrade.
“The event is going to bring higher volatility for the oil prices, which are failing to keep their bullish momentum.”