Home » World » OPEC+ Decision to Further Cut Oil Production Faces Market Doubt and Price Drop

OPEC+ Decision to Further Cut Oil Production Faces Market Doubt and Price Drop

On the evening of November 30, OPEC+ countries decided to support Russia and Saudi Arabia and further reduce oil production. However, oil prices went down. Analysts believe that the market does not yet believe in the effectiveness of additional cuts.

The ministerial meeting of the OPEC+ countries ended on November 30 with participants announcing an additional production cut of 2.2 million barrels per day until the end of the first quarter of 2024. The OPEC secretariat said that the purpose of the new restrictions is to maintain stability and balance the oil market.

At the same time, the actual production reduction will be more than half as much as stated. The announced volumes already included those restrictions that Saudi Arabia and Russia have adhered to since the summer – 1 million barrels per day and 300 thousand barrels per day.

Of what should additionally leave the market, this is 900 thousand barrels. The reduction by 700 thousand barrels will be taken by the UAE, Iraq, Kuwait, Kazakhstan, Algeria and Oman. The remaining 200 thousand barrels are oil products that Russia will not supply to the market.

In anticipation of the OPEC+ decision, prices for the benchmark Brent grade for delivery in February rose to $84, but after the announcement of the results they dropped to $80.5.

Analyst JP Morgan Christian Malek told Reuters that the market does not yet believe the new cuts will be effective. At the same time, he noted, new quotas between countries indicate general trust, and the entry of Brazil, which has not yet made any commitments, strengthens OPEC+.

Hedge fund manager at Andurand Capital Pierre Anduran believes that a real additional cut in oil production could push prices to $90-$95 a barrel, the level they rose to in September when Saudi Arabia and Russia extended cuts until the end of the year. He wrote about this in X.

Today, many factors are playing against the rise in oil prices, which OPEC+ is trying to cope with. On the one hand, economic forecasts, especially in the US and China, are still not improving. On the other hand, the United States also turns a blind eye to the growth of sanctioned oil exports from Iran and has significantly eased the sanctions pressure on oil exports from Venezuela. These countries are part of OPEC+, but are not limited by quotas.

Deputy Prime Minister of Russia Alexander Novak stated after the ministerial meeting that additional OPEC+ measures will contribute to the passage of the winter period of low demand, ensure the stable operation of oil markets and the balance of supply and demand.

2023-11-30 21:58:00
#market #OPEC #oil #prices #fell #EADaily

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