Oil prices jumped almost $4 on Monday as OPEC+ considers reducing output by more than 1 million barrels per day (bpd) to buttress prices with what would be its biggest cut since the start of the COVID-19 pandemic.

Brent crude futures rebounded $3.46, or 4.1%, to $88.60 a barrel by 0915 GMT. U.S. West Texas Intermediate crude was up 4.3%, or $3.39, at $82.88.

Oil prices have tumbled for four straight months since June, as COVID-19 lockdowns in top energy consumer China hurt demand while rising interest rates and a surging U.S. dollar weighed on global financial markets.

To support prices, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, is considering an output cut of more than 1 million bpd ahead of Wednesday's meeting, OPEC+ sources told Reuters. 

If agreed, it will be the group's second consecutive monthly cut after reducing output by 100,000 bpd last month.

"The backdrop for this week’s meeting is precarious, but the fundamentals of oil are relatively healthy," said Peter McNally, global lead for energy at investment research firm Third Bridge.

"The two biggest question marks are the demand outlook (especially in China) and what happens to Russian supply after the EU ban goes into effect on Dec. 5."

OPEC+ missed its production targets by nearly 3 million bpd in July, two sources from the producer group said, as sanctions on some members and low investment by others stymied its ability to raise output. 

While prompt Brent prices could strengthen further in the immediate short term, concerns over a global recession are likely to limit the upside, consultancy FGE said.

"If OPEC+ does decide to cut output in the near term, the resultant increase in OPEC+ spare capacity will likely put more downward pressure on long-dated prices," it said in a note on Friday.

The dollar index fell for a fourth consecutive day on Monday after touching its highest in two decades. A cheaper dollar could bolster oil demand and support prices.

Reuters