2023-12-04 20:43:14
Oil prices continued a third consecutive session of decline on Monday since the announcement of new production cuts by OPEC+, a reaction which complicates the situation for the cartel, whose ammunition is dwindling.
The price of a barrel of Brent from the North Sea for delivery in February dropped 1.07%, to close at $78.03.
A barrel of American West Texas Intermediate (WTI), due in January, fell 1.39% to $73.04.
Since the communication from the Organization of the Petroleum Exporting Countries (OPEC) and its OPEC+ allies following its ministerial meeting on Thursday, WTI has lost more than 6%.
The alliance, however, promised to further reduce its volumes by a net 900,000 barrels per day (bpd) from January to March, bringing the contraction since October 2022 to almost 6 million bpd, or more than 5% of production. worldwide.
“Operators are a little lost and wondering about the exact extent of the reduction,” commented Michael Lynch of Strategic Energy & Economic Research (SEER).
The market doubts the new commitments made, in particular by the United Arab Emirates and Kuwait, “which could not respect the quotas”, warns the analyst.
Beyond the seven countries ready for additional cuts, Angola has already indicated that it will not comply with the quota assigned to it.
“It becomes more and more difficult each time” for OPEC+, explains Michael Lynch, due to the gradual but constant deterioration of the economic situation.
With the crumbling of demand, “they are pushed to decrease further. But the problem is that they will start to run out of ammunition,” argues the analyst.
While OPEC+ restricts its production, the United States is at an absolute record (13.2 million), as is Brazil, while Iran is at its highest in five years and Nigeria is accelerating.
“Even if the production cuts do not reach the targeted 2.2 million barrels (900,000 new cuts and renewal of 1.3 million already in place), their actions should still affect the balance between supply and demand and limit the decline in prices”, nevertheless estimate the analysts at Eurasia Group.
In addition, the fact that the Saudis have obtained that the new reductions are granted by other members “leaves them room” to close the tap a little more, if necessary, they add.
For Danny Flynn of Price Futures Group, the prospect of a more accommodating monetary policy in the coming months, with possible rate cuts, could inject optimism into the market and contribute to the recovery in prices.
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