Oil extends losses amid pessimism over swelling global supplies
Oil extended declines amid expectations that the OPEC+ output cuts announced on Thursday would do little to tighten the market.
West Texas Intermediate dropped as much as 2.1 per cent to below $US75 a barrel, following a 2.4 per cent slide in the previous session. Brent crude was 2 per cent lower, falling below $US80.
The outcome of the OPEC+ meeting was a “confusing, entangled mess”, said Vandana Hari, founder of Vanda Insights. Bloomberg
The alliance announced roughly 900,000 barrels a day of fresh output cuts next year, but the curbs are voluntary, and Angola has already rejected its quota. In the US, the oil rig count increased by five in the most recent week, signalling a continued increase in the country’s output.
Crude initially climbed on Thursday as the production cartel’s preliminary agreement looked likely to help stem an anticipated surplus at the start of next year. That optimism quickly faded amid a lack of clarity from the meeting and doubts over whether the cuts would be fully implemented.
“Market concerns about compliance may be overblown, but poor communication from the OPEC+ meeting contributed to the downside in oil markets over the last sessions,” said Daniel Ghali, a commodity strategist at TD Securities. “However, as the dust settles, we estimate that the agreement may nonetheless be sufficient to skirt an expected surplus over the coming months.”
Crude was set to end the week down about 1 per cent following the OPEC+ rollercoaster, remaining in the range in which it has traded for much of November. Prices have moved into a lower band than in previous months as surging supplies outside of the producer group – including in the US, where output is at a fresh record – risk a market surplus in the first quarter.
Meanwhile, Brazil – which has contributed to the increase in global supplies – said it would join the OPEC+ alliance co-operation charter next year, but woul dnot take part in any production cuts for now.
The outcome of the OPEC+ meeting was a “confusing, entangled mess”, Vandana Hari, founder of Vanda Insights, said in a Bloomberg TV interview.
“These are all still voluntary cuts, and that’s one of the reasons for the disappointment,” she said, adding that whether the extra 900,000 barrels a day of additional curbs were delivered over the first quarter remained to be seen.
Bloomberg
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