Market News

Oil Extends Drop After ‘Voluntary’ OPEC+ Cuts Lead to Confusion - BLOOMBERG

DECEMBER 01, 2023

BY Yongchang ChinBloomberg News


(Bloomberg) -- Oil steadied after a tumble following an OPEC+ meeting that promised further output cuts but was hazy on the details.

Brent crude for February traded under $81 a barrel, after sliding 2.4% in the previous session, while West Texas Intermediate was around $76. The alliance announced roughly 900,000 barrels a day of fresh output cuts from January, but the curbs are voluntary, with Angola already rejecting its quota. Saudi Arabia, meanwhile, said it will prolong its separate 1 million barrel-a-day reduction through the first quarter.

Read More: OPEC+ ‘Voluntary’ Oil Output Cuts Fail to Convince Traders

Crude initially climbed Thursday after OPEC+ reached a preliminary agreement on reductions, in the hopes that would help stem an anticipated surplus at the start of next year. That optimism quickly faded on the lack of details — including the absence of a concluding press conference and final communiques that left traders puzzled.

The outcome of the OPEC+ meeting was a “confusing entangled mess,” Vandana Hari, founder of Vanda Insights, said in a Bloomberg TV interview. “These are all still voluntary cuts, and that’s one of the reasons for the disappointment,” she said, adding that whether the extra 900,000 barrels a day of additional curbs are delivered over the first quarter remains to be seen.

Crude is set to end the week flat following the OPEC+ roller-coaster, after logging its second monthly decline on signals of increasing supply from outside the group and a shaky demand outlook. Those concerns were underscored on Thursday, when the US reported that crude output in the world’s largest producer hit a record high of 13.2 million barrels a day in September.

Read More: Skepticism and Confusion: What Analysts Say About the OPEC+ Cuts

Meanwhile, Brazil — which has contributed to the increase in global supplies — said it would join the OPEC+ alliance cooperation charter next year, but won’t be taking part in any production cuts for now.

The outcome of the meeting is a “bittersweet victory” for Saudi Arabia as its inability to secure a group-wide agreement doesn’t bode well for the group’s unity and its ability to balance the market, Jorge Leon, senior vice president of oil market research at Rystad Energy, said in a note. There’s likely to be a supply deficit of about 400,000 barrels a day in the first half with the cuts, and Brent should trade between $80 and $85 a barrel in the coming months, he said.


This website uses cookies We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you've provided to them or that they've collected from your use of their services
Real Time Analytics