Oil Prices Fall Ahead of OPEC+ Output Meeting

By Adedapo Adesanya

Oil prices fell by nearly 2 per cent on Wednesday as investors awaited an imminent decision on production cuts by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+).

OPEC+ will meet on Thursday and the latest signal is that the 22-member alliance is likely to extend output cuts until the end of the first quarter of next year.

The group has been aiming to unwind output cuts through 2025 but a slowdown in global demand and rising output outside the group pose hurdles to that plan and have weighed on prices, as Brent crude futures shrank by $1.31 or 1.78 per cent to $72.31 a barrel and the US West Texas Intermediate (WTI) crude futures depreciated by $1.40 or 2 per cent to $68.54 per barrel.

OPEC+ members have cut around 5.86 million barrels per day of output, or about 5.7 per cent of global demand, in a series of steps agreed since 2022 to support the market.

An output hike of 180,000 barrels per day was planned for January from the eight members involved in OPEC+’s most recent cuts of 2.2 million barrels per day. The hike has been delayed from October due to falling prices.

Meanwhile, crude oil prices moved higher today after the US Energy Information Administration (EIA) reported an inventory decline of 5.1 million barrels for the week to November 29.

The change compared with a build of 1.23 million barrels for the week, as estimated by the American Petroleum Institute a day earlier. It also compared with an EIA-estimated draw of 1.8 million barrels for the prior week.

The authority also reported builds in fuel inventories for the period.

In gasoline (petrol), the EIA estimated an inventory build of 2.4 million barrels for the final week of November, compared with a build of 3.3 million barrels for the previous week.

Tensions across several countries also weighed on prices. In Syria, rebel forces that threatened to draw in forces from several oil-producing countries all lent support to oil prices.

In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if their truce collapses and that its attacks would go deeper into Lebanon and target the state itself.

In South Korea, lawmakers have submitted a bill to impeach President Yoon Suk Yeol after his declaration of martial law on Tuesday, which was reversed within hours, sparking a political crisis in Asia’s fourth-largest economy.

Demand pressure continued despite the recent stronger-than-expected factory activity data out of China.