By Adedapo Adesanya
The oil market fell slightly on Monday, as demand headwinds outweighed a widely expected extension of voluntary output cuts through the middle of the year by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
Brent futures dropped 81 cents to quote at $82.74 a barrel while the US West Texas Intermediate (WTI) weakened by $1.22 to trade at $78.75 a barrel.
The OPEC+ producers agreed over the weekend to extend their voluntary oil output cuts of 2.2 million barrels per day into the second quarter to cushion the market amid global economic concerns and rising output outside the group.
Market analysts noted that the market reaction was rather muted at the start of the week.
A surprise was the additional Russian cuts of 471,000 barrels per day – a result of lower refinery runs due to Ukrainian drone strikes.
The OPEC+ cuts would lead to lower production from the group at 34.6 million barrels per day in the second quarter against an earlier forecast that output could rise above 36 million barrels per day in May as producers unwind supply cuts.
Oil importers and consumers have benefitted from lower oil prices and a general decline in the US Dollar since their respective highs in September – October 2023.
The global growth slowdown has materialized via the reality of technical recessions in major economies like the UK and Japan, with the European Union close on their heels.
China, the largest oil importer and which makes up the majority of oil demand growth each year, has also struggled to revitalise its economy, keeping oil prices capped.
This week, Chinese officials will meet to decide on growth targets for the year and other strategic measures but to date, accommodative measures have proven to provide limited relief. The growth target is expected to be set at the same level as 2023, around 5 per cent.
Rising geopolitical tensions due to the Israel-Hamas conflict and Houthi attacks on Red Sea shipping have supported oil prices in 2024, although concern about economic growth has weighed.
Yemen’s Iran-backed Houthis vowed on Sunday to continue targeting British ships in the Gulf of Aden following the sinking of the Rubymar cargo ship.
Meanwhile, Hamas and Egyptian mediators said on Monday they were pressing on with talks on securing a ceasefire in Gaza, despite Israel’s decision not to send a delegation.
