Brent drops as OPEC+ decision reflects weak oil demand
The front-month ICE Brent contract has declined by $0.76/bbl on the day, to trade at $71.75/bbl at 09.00 GMT.
PHOTO: Oil pumpjacks and a pipeline. Getty Images
Upward pressure:
OPEC’s latest decision to extend oil output cuts by another three months until the end of March 2025 has lent support to Brent price.
The Saudi-led coalition had previously planned to gradually unwind the 2.2 million b/d cuts starting January 2025, with monthly production increases of 180,000 b/d.
“OPEC+, as expected, decided to delay, for a third time until April, a planned gradual increase in production,” market analysts at Saxo Bank said.
In addition to a further delay in unwinding supply cuts, OPEC+ members will bring this supply back at a slower pace. The unwinding of the voluntary production cut will take place on a monthly basis until the end of September 2026.
“The gradual increase by pack probably comes along with some promises from OPEC over producers to continue to make compensation cuts,” Price Futures Group’s senior market analyst Phil Flynn remarked.
OPEC+ is responsible for about half of the world's oil output, Reuters reports.
Downward pressure:
Despite its alignment with market fundamentals, OPEC's decision to extend cuts has weighed on Brent crude’s price.
This move reflects OPEC's cautious outlook on 2025 demand growth and concerns over increased output from non-OPEC producers.
“Once again, major oil producers have deferred plans to ramp up production, reacting to a stagnant market grappling with sluggish global demand and heightened output from other regions,” SPI Asset Management’s managing partner Stephen Innes said.
The oil market is grappling with a demand slowdown in China, the world’s second-largest oil consumer.
Chinese state-owned refineries including Sinopec, PetroChina, and Sinochem, plan to lower crude throughput in December to produce about 39.28 million mt. The daily crude throughput is expected to be roughly around 1.3 million mt (9.33 million b/d), a drop of nearly 3% from November, according to market intelligence provider JLC.
By Aparupa Mazumder
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