Brent dips despite OPEC+ output cut extension
The front-month ICE Brent contract dipped $0.72/bbl on the day from Friday, to trade at $81.34/bbl at 09.00 GMT.
PHOTO: Getty Images
Upward pressure:
Eight members of the OPEC+ coalition, comprising Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman, have collectively agreed to extend their production cut of 2.2 million b/d until September 2024. This decision has led to increased upward pressure on Brent futures.
Additionally, these member countries have committed to extending the combined output cut of 1.65 million b/d, initially announced in April 2023, until December 2025. This has further intensified the upward pressure on oil prices.
Downward pressure:
The OPEC+ coalition has opted to gradually ease these cuts on a monthly basis from October 2024 to September 2025. This move has been perceived as "bearish" by the market, resulting in downward pressure on Brent futures.
“Overall, I think the decision is slightly bearish, as the market was not expecting OPEC+ to start unwinding the cuts in the fourth quarter,” Vandana Hari, founder of oil market analysis firm Vanda Insights remarked.
Goldman Sachs analysts shared a similar view, highlighting that despite the extension of production cuts, the meeting was perceived as bearish, given that eight OPEC+ countries had already indicated plans to phase out the 2.2 million b/d of voluntary cuts between October 2024 and September 2025.
Brent futures have recently faced pressure due to concerns that the US Federal Reserve may prolong high interest rates, potentially dampening economic growth and reducing oil demand.
By Tuhin Roy
Please get in touch with comments or additional info to news@engine.online
