By Adedapo Adesanya
Oil fell on Monday as traders approached the market with caution over plans by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) to cut production in the first quarter of 2024.
Brent crude futures lost 85 cents or 1.08 per cent to finish at $78.03 a barrel while the US West Texas Intermediate (WTI) crude futures depreciated by $1.03 or 1.39 per cent to sell at $73.04 per barrel.
OPEC+ announced voluntary production cuts at its meeting last week and this has raised doubts about whether or not producers would fully implement them. Investors were also unsure about how the cuts would be measured.
Traders over the past five months have waited to see if production cuts, as well as predicted changes in demand, would come to fruition.
The group discussed 2024 output amid forecasts the market faces a potential surplus and as a 1 million barrel per day cut by Saudi Arabia was set to end next month.
OPEC+’s output of some 43 million barrels per day already reflects cuts of about 5 million barrels per day aimed at supporting prices and stabilising the market.
The total curbs amount to 2.2 million barrels per day from eight producers, OPEC said in a statement after the meeting. Included in this figure is an extension of the Saudi and Russian voluntary cuts of 1.3 million barrels per day.
The 900,000 barrels per day of additional cuts pledged on Thursday, includes 200,000 barrels per day of fuel export reductions from Russia, with the rest divided among six members.
Speaking on Monday, Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg that OPEC+ production cuts could extend beyond March 2024 if the market requires it, criticizing commentators for failing to understand the output deal.
He accused commentators of wanting to be “conspiratorial” and failing to understand the deal. The Saudi prince suggested that this would change once “people see the reality of the deal”.
The prince emphasized that the 2.2 million in output cuts would be delivered.
“I honestly believe that the 2.2 million will overcome the usual inventory build that usually happens in the first quarter,” he told Bloomberg, noting that “we wanted the market to know there would be a phased-in approach” because the cartel cannot predict what the market situation will be in the first three months of the New Year. That required the cartel to “be careful about what language we use”.
The market was also weakened by surveys showing global manufacturing activity remained weak in November on soft demand, with factory activity in Europe contracting, while there were mixed signs on the strength of China’s economy.
Elsewhere, Western countries have stepped up efforts to enforce the $60 a barrel price cap on seaborne shipments of Russian oil imposed to punish Moscow for its war in Ukraine.
The US on Friday imposed additional sanctions on three entities and three oil tankers.
Modupe Gbadeyanka