The WTI contract for January dropped $1.90, or 2.44 per cent, to settle at $75.96 a barrel, while the Brent contract for January shed 27 cents, or 0.17 per cent, to settle at $82.83 a barrel
U.S. crude dropped Thursday, erasing early gains, as traders grew more convinced that OPEC+, a group composed of OPEC plus its oil-producing allies, will not deliver on promised output cuts.
The West Texas Intermediate (WTI) contract for January dropped $1.90, or 2.44 per cent, to settle at $75.96 a barrel, while the Brent contract for January shed 27 cents, or 0.17 per cent, to settle at $82.83 a barrel.
OPEC+ released a statement Thursday that didn’t formally endorse production cuts, but individual countries announced voluntary reductions totalling 2.2 million barrels per day for Q1 2024, with Saudi Arabia, the de-facto leader and largest member, leading the way.
The market was disappointed with the outcome because the cuts are short term and the group failed to agree on a unanimous strategy, compelling members to implement unilateral cuts, said Jorge Leon, Rystad Energy’s senior VP, in a note after the meeting.
Riyadh agreed to extend its voluntary production cut of 1 million bpd, a source in the Energy Ministry told the Saudi Press Agency.
Iraq is cutting by 223,000 bpd, the UAE 163,000 bpd, Kuwait 135,000 bpd, Kazakhstan 82,000 bpd, Algeria 51,000 bpd and Oman 42,000 bpd.
Russia also deepened its voluntary supply cut to 500,000 bpd through the end of the first quarter, as per a statement from Deputy Prime Minister Alexander Novak.
Traders are concerned that the cuts are voluntary and not mandatory, raising the question of whether OPEC+ can really follow through and curtail output, as per Phil Flynn, an analyst at the Price Futures Group.
The proof is going to be in the pudding, Flynn added. Instead of having a clear answer to what is going to happen we only have a promise – the promise is making people nervous, he said.
