Oil prices experienced a significant 4% decline on Wednesday following an unexpected delay in the scheduled OPEC+ ministerial meeting. The meeting, originally slated for Sunday, has now been postponed to November 30, leaving the market in suspense and raising uncertainties about the future trajectory of crude production cuts.
As the news broke, Brent crude futures plummeted by $3.39, or 4.1%, settling at $79.06 per barrel by 1412 GMT. Simultaneously, U.S. West Texas Intermediate (WTI) crude futures experienced a drop of $3.26, or 4.2%, reaching $74.51.
The decision to delay the OPEC+ meeting was communicated through a statement by OPEC, offering no clear rationale for the unexpected change in schedule. The OPEC+ coalition, comprising major oil-producing nations such as Saudi Arabia, Russia, and other allies, was initially anticipated to discuss potential modifications to an existing deal that already imposes limits on oil supply until 2024, according to industry analysts and OPEC+ sources.
Speculation regarding the delay arose earlier on Wednesday when Bloomberg News reported that the meeting could be deferred for an unspecified duration due to Saudi Arabia expressing dissatisfaction with the output numbers presented by other member nations.
Analysts had forecasted, prior to the delay announcement, that OPEC+ was likely to either extend or deepen oil supply cuts well into the coming year. The delay injected further uncertainty into an already volatile market, with both Brent and WTI benchmarks having experienced four consecutive weeks of decline, the former sliding from nearly $98 in late September. The downward trend has been attributed to mounting supplies, concerns about demand, and the looming possibility of an economic slowdown.
Monday had briefly offered a glimmer of hope as both contracts saw a modest 2% uptick. This surge followed reports from three OPEC+ sources revealing the group’s consideration of additional oil supply cuts during the November 26 meeting.
“The upcoming meeting has been the key central focus for oil prices for now, with sentiment shrugging off the sharp build in U.S. crude inventories,” remarked Jun Rong Yeap, a market strategist at IG, prior to the unexpected delay.
To stabilize prices, experts argue that OPEC and its allies must not only extend but also intensify their production cuts. John Evans of oil broker PVM emphasized in a note on Wednesday, “A rollover of cuts and voluntary cuts will send the market south, for the current level of supply clamp is not enough to persuade the market that it is ‘tight.’ Oil is in for some tense and headline-reactive days.”
Earlier in the week, an OPEC technical panel took the unusual step of inviting a top financial market dealer to provide a presentation, revealing a bearish outlook for the oil market, as reported by Reuters.
Even if OPEC+ nations opt to extend cuts into the next year, the head of the International Energy Agency’s (IEA) oil markets and industry division cautioned on Tuesday that the global oil market could still witness a slight supply surplus in 2024.
In conclusion, the unexpected postponement of the OPEC+ meeting led to a cascade effect, causing oil prices to decline by 4%, raising concerns and uncertainties about the future trajectory of crude production cuts.
Source: Reuters
