Oil Holds Drop After ‘Voluntary’ OPEC+ Cuts Lead to Confusion

2023-12-01 10:18

Oil steadied after tumbling on Thursday following an OPEC+ meeting that promised further output cuts but was hazy

Oil steadied after tumbling on Thursday following an OPEC+ meeting that promised further output cuts but was hazy on the details.

Brent crude for February traded below $81 a barrel, after sliding 2.4% in the previous session, while West Texas Intermediate was near $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 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 provided a slightly confusing set of numbers that left traders puzzled.

“The absence of a comprehensive breakdown with only a select number of countries detailing their reduction failed to convince the market,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note. “The lack of a published agreement also raises the prospect of some producers not adhering to their voluntary reductions.”

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.

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.

While OPEC+ wants to be seen in control of the oil market, the announcement caused confusion as it was left to individual members to issue statements on the size of their voluntary cuts, UBS Group AG strategist Giovanni Staunovo said in a note. “Market participants will closely watch compliance levels, but those additional cuts should prevent an oversupplied market in 1Q 2024,” he said.

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