OPEC+ Voluntary Q1 Cuts Cause Drop in Oil Prices

An oil terminal off Waidiao island in Zhejiang province, China was captured in stunning aerial footage on January 4, 2023. This unique view of the crude oil tanker was made possible by China Daily via REUTERS/File Photo.

OPEC+ producers made headlines this November with a groundbreaking agreement to impose significant voluntary oil output cuts for the first quarter of 2024. However, these cuts failed to meet market expectations, leading to an almost 2% decline in oil prices on Thursday.

Brent crude futures for January have fallen by 27 cents to $82.83 a barrel, signaling a 5% loss in November. Meanwhile, the January WTI contract dropped almost 2.5% to $75.90, and is on track for a 6% loss this month.

This comes after Saudi Arabia, Russia, and other OPEC+ members, who are responsible for over 40% of global oil production, agreed to voluntary output cuts approaching 2 million barrels per day for the first quarter of 2024. While at least 1.3 million bpd of these cuts are an extension of existing voluntary curbs, a deeper cut was anticipated.

Experts remain divided on the actual impact of these cuts, with some stating that the market conditions may not be significantly affected in the first quarter of 2024. At the same time, countries like the United States, the world’s leading oil producer, continue to see growth in crude oil output.

This meeting was particularly significant as it was held on the same day as the U.N. climate conference, which high-level stakeholders attended in Dubai. Additionally, OPEC+ extended an invitation to Brazil, one of the world’s top 10 oil producers, to join their ranks.

As crude output continues to fluctuate globally, the impact of these voluntary output cuts remains to be seen.

Content courtesy of Laura Sanicola in Washington, Edited by Simon Webb, Lisa Shumaker, and Marguerita Choy.

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