July 12, 2024

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Opec+ production cuts leave oil market sceptical

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Opec+ members have agreed to make additional voluntary cuts to oil production in 2024 in an increasingly fraught attempt to bolster the market, but crude prices fell due to signs of ongoing strains in the group.

Saudi Arabia pledged to extend an existing voluntary cut of 1mn barrels a day until the end of the first quarter while Russia said it would deepen its existing voluntary export reduction to 500,000 b/d from 300,000 b/d, as the group looks to offset a stuttering global economy and rising supplies from rival producers.

But in an unusual step Opec officials said additional voluntary cuts, designed to take the total reduction above 2mn b/d or about 2 per cent of world supply, would be announced by individual members in due course rather than the secretariat.

The uncertainty fed into growing market anxiety that strains are emerging in the Opec+ coalition more than a year after it started cutting production, with only a limited effect so far on prices.

The Opec+ meeting had first been delayed from Sunday as members wrangled over production targets and was moved online rather than have ministers meet face to face in Vienna at Opec’s headquarters.

Brent crude, the international oil benchmark, initially rallied on news of the cuts but then reversed to trade down on the day, with the contract for delivery in February losing more than 2 per cent to trade near $80 a barrel, well below the $98 a barrel year-high hit in September.

US benchmark West Texas Intermediate fell 2.5 per cent to $76 a barrel.

Traders said that the market was losing confidence in the ability of Opec+ to keep bolstering a price buffeted by expectations of relatively tepid demand growth next year and rising alternative supplies.

But analysts said that if all the cuts were made, supplies would tighten significantly in the first quarter of next year.

“The market is going to test…

2023-11-30 14:57:30

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