In a significant development, the OPEC+ alliance announced on Thursday its unanimous decision to implement additional output cuts of 1 million barrels per day. This move, coupled with an extension of Saudi Arabia’s independent reduction of 1 million barrels per day, is poised to impact global oil prices.
Multiple sources, citing delegates from the group’s meeting, reported the decision. Members of OPEC+, a coalition comprising some of the world’s leading oil producers and their allies, are set to formally vote on the proposed deal during their scheduled meeting on Thursday.
As news of the production cuts circulated, West Texas Intermediate (WTI) futures (CL=F) experienced an uptick of over 1%, stabilizing at approximately $79 per barrel. Simultaneously, Brent crude (BZ=F), the international benchmark, surged over 1%, surpassing the $84 per barrel mark.
The anticipation leading up to OPEC’s decision had been fueled by the postponement of the cartel’s originally scheduled meeting last week, attributed to reported internal disagreements regarding output cuts for the upcoming year.
“The dissension among the members of OPEC+ is there. And that dissension stems from… some of the members not wanting to continue cuts because they want to get some of their market share back,” explained Scott Bauer, CEO of Prosper Trading Academy, speaking to Yahoo Finance shortly after the meeting’s delay last week.
The existing output cuts enforced by OPEC members are designed to limit global supply and maintain a stable foundation for oil prices. In a surprising move in April, Saudi Arabia, the largest OPEC member, declared unilateral reductions exceeding 1 million barrels per day. Concurrently, Russia announced constraints of 500,000 barrels per day.
Analysts had anticipated that OPEC would likely extend these reductions into the next year and potentially deepen them.
“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,'” warned PVM oil broker John Evans in a recent note.
Despite the ongoing cuts, crude oil prices remain nearly 20% below the 2023 highs witnessed in late September. This decline has been attributed to concerns about slowing demand and the simultaneous increase in oil supply.
“I think over the next couple of months we’re going to continue to see pressure on these prices,” predicted Andy Lipow, president of Lipow Oil Associates, in a recent statement to Yahoo Finance.
In conclusion, the OPEC+ group’s latest agreement on additional output cuts signifies a concerted effort to navigate and influence global oil markets, presenting a pivotal development with potential far-reaching implications for the industry’s supply dynamics and pricing trends.
Source: Yahoo Finance
