The OPEC+ group on Thursday agreed to additional output curbs of 1 million barrels per day in a move that could send oil prices higher. The deeper reductions come alongside an extension of Saudi Arabia’s unilateral reduction of 1 million barrels per day.
The move was reported by multiple outlets, citing delegates at the group’s meeting. Members of OPEC+, the consortium of some the world’s largest producers and its allies, will vote on the deal at the group’s meeting Thursday.
West Texas Intermediate (CL=F) futures were down fractionally at around $78 per barrel in midday trading while Brent (BZ=F) crude, the international benchmark price, rose 1% to about $84.
“Production increases in the U.S., Guyana and Brazil will soften the blow caused by OPEC’s announced production cuts but that doesn’t mean consumers in the US won’t feel some sting from this at the pump,” KPMG US energy leader Angie Gildea said immediately following the announcement.
“Further, even though weaker global economic expectations have been keeping prices relatively low right now, it just takes one wildcard event to disrupt the market and put us back in a tight supply situation that could send prices back up,” added Gildea.
The market has been speculating over OPEC’s decision since the oil cartel postponed its scheduled meeting last week over reported internal disagreement about output cuts for next year.
“The dissension among the members of OPEC+ is there. And that dissension stems from … some of the members not wanting to continue cuts because they want to get some of their market share back,” Scott Bauer, CEO of Prosper Trading Academy, told Yahoo Finance shortly after the meeting was pushed back last week.
Current cuts by OPEC are aimed at constraining global supply and keeping a floor under oil prices. In April, Saudi Arabia, the largest member of the cartel, surprised the markets when it announced unilateral reductions of more than 1 million barrels per day. Russia also announced constraints of 500,000 barrels per day.
Analysts had expected OPEC would be likely to extend reductions into next year — and possibly even deepen them.
A “rollover of cuts and voluntary cuts will send the market south, for the current level of supply clamp is not enough to persuade the market that it is ‘tight,'” PVM oil broker John Evans said in a recent note.
Despite the cuts, crude is almost 20% lower than the 2023 highs reached in late September amid concerns of slowing demand and increasing supply.
“I think over the next couple of months we’re going to continue to see pressure on these prices,” Andy Lipow, president of Lipow Oil Associates, recently told Yahoo Finance.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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