Oil Prices Climb Amid OPEC+ Cuts Worries, Demand Concerns

By Adedapo Adesanya

Oil prices settled up slightly on Monday as production from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) cuts failed to fully offset worries around crude oversupply and softer fuel demand growth next year.

Brent crude futures grew by 19 cents or 0.3 per cent to $76.03 a barrel and the US West Texas Intermediate (WTI) crude futures gained 9 cents or 0.1 per cent to trade at $71.32 per barrel.

There are indications that OPEC+’s 2.2 million barrel-per-day production cuts in the first quarter of next year will be counterbalanced by a potential supply surplus, signalling a bearish outlook for oil prices.

Output growth in non-OPEC countries is expected to lead to excess supply next year.

So far, OPEC+ output cut announcements from the November 30 meeting have failed to move the needle on oil prices, prompting the Saudi Energy Minister to criticize commentators for failing to understand the deal.

It also prompted an urgent trip for Russian President Vladimir Putin to Saudi Arabia as well as speculations that the cartel has lost its ability to move the market due to increased output from the US, the world’s largest producer.

Both Saudi Arabia and Russia have indicated that cuts may be extended beyond the first quarter of 2024; however, this has done little to ease concerns over what amounts to a short, three-month voluntary output cut agreement.

Market analysts also said members participating in the output cuts are not only seeing reduced revenue from smaller volumes but also from the price plunge that developed after the last OPEC+ decision.

While cuts will not implemented until next month, it means oil faces a volatile two months ahead before the market can understand how compliant the cuts are.

Meanwhile, pressure came from the latest consumer price index data from China, the world’s biggest oil importer, showing rising pressures as weak domestic demand cast doubt over the country’s economic recovery.

Plans by the Chinese government to spur domestic demand and consolidate and enhance the economic recovery in 2024 did not help the market.

This week, investors are watching for guidance on interest rate policies from meetings at five central banks, including the US Federal Reserve, as well as US inflation data to assess the potential impact on the global economy and oil demand.