Oil prices stabilise after weak OPEC+ action

By News Desk
December 02, 2023

LONDON: Oil prices were stable on Friday following a 2 percent drop on Thursday, with the market unconvinced that the latest round of OPEC+ production cuts will be able to lift prices out of their recent slump.

Brent crude futures for February rose by 16 cents, or 0.2 percent, to $81.02 a barrel by 1520 GMT on their first day as the front-month contract. U.S. West Texas Intermediate crude futures (WTI) rose 25 cents, or 0.33 percent, to $76.21.

OPEC+ producers agreed on Thursday to remove around 2.2 million barrels per day (bpd) of oil from the global market in the first quarter of next year, with the total including a rollover of Saudi Arabia and Russia's 1.3 million bpd of current voluntary cuts.

This picture shows oil pumpjacks along a section of Highway 33 known as the Petroleum Highway north of McKittrick in Kern County, California. — AFP/File

OPEC+, which pumps over 40% of the world's oil, is focusing on reducing output as prices have fallen from about $98 in late September amid concerns over weaker economic growth in 2024.

The market received the news with scepticism and confusion, driven by concerns about compliance given the voluntary nature of the reductions, ongoing macroeconomic headwinds, and investors' prior expectations of deeper cuts. "Markets may have been pricing in another larger cut, and it just didn’t meet those expectations," OANDA analyst Craig Erlam said.

The cuts "will not stop a billowing cloud of confusion that is going to take the oil market weeks and months to figure out and only if the self-reporting data is indeed reliable," PVM analyst John Evans said.

"The only real hope for long term balance in the market is for a dramatic improvement in global economic data as we start the new year," Onyx Capital Group CEO Greg Newman said. U.S. manufacturing contracted for the 13th consecutive month in November with a PMI score of 46.7, missing economists' forecast of 47.6. Factory data remained weak across the globe in November on poor demand, surveys showed. Investors will also be looking ahead to comments by Federal Reserve Chair Jerome Powell later on Friday.