In a decisive move aimed at stabilizing global oil markets, the OPEC+ group has agreed to implement additional output cuts of 1 million barrels per day, potentially influencing an upward surge in oil prices. The group’s decision was disclosed on Thursday and accompanied by an extension of Saudi Arabia’s independent reduction of 1 million barrels per day.
Reports from multiple sources, citing delegates present at the group’s meeting, conveyed the agreement. The OPEC+ consortium, comprising some of the world’s major oil producers and their allies, is set to formally vote on this significant deal at its meeting on Thursday.
As news of the output curbs by OPEC+ broke, the impact on oil futures markets was immediate. West Texas Intermediate (CL=F) futures experienced a surge of over 1%, reaching around $79 per barrel. Simultaneously, Brent (BZ=F) crude, the international benchmark, saw a similar uptick of more than 1%, settling above $84 per barrel.
Speculation had been rife regarding OPEC’s decision, especially after the oil cartel postponed its previously scheduled meeting last week due 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, reflecting on the uncertainty prevailing within the group.
The ongoing output cuts by OPEC+ members are strategically designed to control global supply and maintain a stable floor under oil prices. In a surprising move in April, Saudi Arabia, the leading member of the cartel, announced unilateral reductions exceeding 1 million barrels per day. Russia also followed suit with constraints of 500,000 barrels per day.
Anticipations were high that OPEC would likely extend these reductions into the next year, with some analysts even suggesting the possibility of deepening the cuts.
“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 prices remain nearly 20% lower than the 2023 highs witnessed in late September, fueling concerns about slowing demand and increasing supply.
“I think over the next couple of months we’re going to continue to see pressure on these prices,” cautioned Andy Lipow, president of Lipow Oil Associates, underlining the prevailing uncertainties in the oil market. As the OPEC+ group takes decisive steps to manage output, the global oil industry awaits the formalization of the agreement through the impending vote, with potential implications for oil prices in the coming months.
Source: Yahoo Finance
