OPEC+ Production Cuts Cause Crude Oil Dip

London: 5 December 2023 (TraderMade) Oil prices declined by about 7 to 8% as the market reacted to the Organization of the Petroleum Exporting Countries and allies, including Russia, known as OPEC+, agreeing to keep their production cuts in place. The decision comes in the wake of renewed fighting in the Israel-Hamas war, which has stoked supply concerns.

Brent crude (UKOIL) declined by 7.67% to $78.07 per barrel at about 07:08 AM GMT, compared to its 30 November High of $84.551 per barrel. Similarly, WTI Crude (OIL) decreased by 7.99% to $73.248 per barrel, compared to the 30 November High of $79.608 per barrel.

Market participants remain skeptical that the OPEC+ cuts will have a significant impact, citing a stronger US dollar, which makes oil more expensive for holders of other currencies and could dampen oil demand.

OPEC+ agreed (during a video conferencing meeting held on 30 November 2023) to voluntary output cuts of 2.2 million barrels per day (bpd) for the first quarter of 2024, with Saudi Arabia rolling over its current voluntary cut. However, 1.3 million bpd of those cuts are already in place.

Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, informed that the production cuts can be extended beyond the first quarter if needed.

The resumption of fighting in the Israel-Hamas war, as well as attacks on three commercial vessels in the southern Red Sea, have also raised supply concerns. These incidents follow a series of strikes in Middle-Eastern waters since the war broke out on 7 October.