Crude oil prices surprisingly traded lower on Friday morning hours after the Organization of Petroleum Exporting Countries and their allies (OPEC+) voluntarily agreed on a fresh production cut of nearly 1 million barrels a day by early 2024.
Analysts said the market reaction was because the production cut move failed to enthuse traders and, instead, drew skepticism on the group’s ability to achieve supply cuts target.
The benchmark Brent crude, which had initially rallied on the news, declined to $82.83 a barrel, down 0.32 percent, while West Texas Intermediate (WTI) slipped 0.26 percent on Friday morning trading hours.
Traders remain unconvinced about the implementation of the supply cuts as the cuts are reportedly to be announced by each member country and not the group as a whole, drawing uncertainty on the group’s ability to maintain the cuts, analysts said.
OPEC Announces Additional Voluntary Cuts
OPEC officials said additional voluntary cuts, designed to take the total reduction above 2.2 million barrels a day (bpd) or about 2 percent of the world supply, would be announced by individual members in due course rather than the secretariat, Financial Times reported.
Saudi Arabia has announced it will extend the voluntary cut of 1 million bpd it has had in place since July.
Russia said it would deepen its existing voluntary supply cuts to 500,000 bpd from 300,000 bpd. Both the OPEC members had already pledged output cuts earlier this year, as concerns loom over subdued demand from China, the world’s largest energy consumer.
Last week, the International Energy Agency (IEA) also reportedly flagged a surplus in supply in 2024.
Meanwhile, in a surprise move, Brazil is to join the OPEC+ alliance from January 2024.
The Latin American country produces around 3.2 million bpd of crude and is a major supplier to China, according to S&P Global data.
Follow us on
