Oil prices decline 4% on Wednesday following the surprising decision by OPEC+ producers to postpone their ministerial meeting on output. The meeting, which was originally scheduled for Sunday, has now been rescheduled to take place on November 30, as announced by OPEC in a statement that offered no explanation for the delay.
Brent crude futures took a hit, declining by $3.39, or 4.1%, to reach $79.06 per barrel by 1412 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures witnessed a drop of $3.26, or 4.2%, settling at $74.51. The abrupt delay in the OPEC+ meeting, which comprises major oil-producing countries such as Saudi Arabia, Russia, and other allies, has raised uncertainties about the future trajectory of crude production cuts.
The meeting was anticipated to deliberate on potential adjustments to an existing deal that already imposes limits on oil supply until 2024, according to insights from analysts and OPEC+ sources. Earlier on the same day, Bloomberg News reported the possibility of an unspecified delay in the meeting after Saudi Arabia expressed dissatisfaction with the output numbers presented by other members.
Prior to the unexpected delay, industry analysts had speculated that OPEC+ would likely extend or intensify oil supply cuts into the upcoming year. Both Brent and WTI oil benchmarks have experienced a continuous decline over the past four weeks, with Brent plummeting from nearly $98 in late September. The downward trend has been attributed to increasing supplies, concerns about demand, and apprehensions regarding a potential economic slowdown.
Monday saw a brief uptick of around 2% in both contracts following reports from three OPEC+ sources who informed Reuters that the group was considering 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, before the meeting delay was announced.
To stabilize prices, OPEC and its allies would need not only to extend but also to intensify the existing cuts, cautioned John Evans of oil broker PVM in a note on Wednesday. He noted that a mere rollover of cuts and voluntary reductions might lead to a decline in the market, emphasizing that the current level of supply restraint is insufficient to convince the market of its tightness. Evans predicted tense and headline-reactive days for the oil industry.
Earlier in the week, an OPEC technical panel invited a top financial market dealer to provide a presentation, as seen by Reuters, painting a bearish outlook for the oil market. Even if OPEC+ nations decide to extend cuts into the next year, the head of the International Energy Agency’s (IEA) oil markets and industry division warned on Tuesday that the global oil market could still experience a slight supply surplus in 2024.
In conclusion, the day’s unexpected events, including the postponement of the OPEC+ meeting, have left a clear impact on the energy market, as evidenced by the fact that oil prices decline 4%.
Source: Reuters
