OPEC must stabilize prices
Oil plunged as a highly-anticipated OPEC+ meeting drew to an underwhelming close, with market participants disappointed by smaller-than-expected cuts and hazy details surrounding quota enforcement.
West Texas Intermediate tumbled by 2.4 per cent to settle at below US$76 a barrel after a dramatic session that erased a majority of the week’s gains. The alliance announced that a roughly 900,000 barrels a day of additional oil output cuts will take effect in January, but the curbs are largely voluntary.
Angola has already rejected its new target, saying it will continue pumping as it has been. Whether other OPEC+ members will follow through on their commitments remains to be seen.
“What the market was hoping for was a unified voice on agreed-upon cuts,” said Stewart Glickman, an analyst at CFRA Research in New York. “Instead, what we apparently are getting is a series of individual Saudi-lite voluntary cuts.”
Saudi Arabia, the group’s biggest producer, extended its unilateral cut of 1 million barrels a day to the end of March. Oil shed some losses on an announcement that Russia will increase its export reduction to 500,000 barrels a day below the May-June average.
Underscoring the difficulty of OPEC’s task, the U.S. on Thursday reported that crude output in the world’s largest producer hit a record high of 13.2 million barrels a day in September. The International Energy Agency said earlier this month that it expects the oil market to flip back into a surplus amid plentiful supplies from outside the producer group, including bumper flows from the U.S.
The biggest news out of the OPEC+ meeting so far is that Brazil will join the alliance next year. But the Latin American producer, which is set to raise output to 3.8 million barrels a day next year, won’t be taking part in any production cuts.
- WTI for January delivery fell 2.4 per cent to settle at $75.96 a barrel in New York.
- Brent for January settlement, which expires Thursday, sank 0.3 per cent to settle at $82.83 a barrel.
- The more-active February contract declined 2.4 per cent to settle at $80.86 a barrel.