(New York) New crude production reductions announced by certain OPEC exporting countries were received with skepticism by the oil market and did not have the expected effect on prices, which fell further.
The price of a barrel of North Sea Brent for delivery in February, which is the first day of use as a benchmark contract, fell 2.44% to $78.88.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in January, lost 2.48% to $74.07.
After lengthy negotiations, the Organization of the Petroleum Exporting Countries and its allies (OPEC) announced new oil production cuts for 2024 on Thursday.
“But there is a fair amount of skepticism on the part of brokers who wonder whether the volume of these cuts will really be realized,” doubted Andrew Lebow of Commodity Research Group.
Riyadh announced the extension of its reduction measure of one million barrels per day (bpd) until “the end of the first quarter of 2024”, followed by Russia, which also extends cuts on its exports by three months , deepened to 200,000 barrels.
Other member countries of the alliance such as the United Arab Emirates, Iraq, Kuwait, Kazakhstan, Algeria and Oman will also make smaller reductions, for nearly 700,000 bpd in total, a the group said in a press release.
In total, OPEC announced additional voluntary cuts amounting to 2.2 million bpd, “which seems impressive at first glance,” admit DNB analysts. But without counting the extensions of the additional voluntary cuts by Russia and Saudi Arabia anticipated by the market, only 900,000 bpd should therefore be withdrawn until March 2024.
“What was announced as a major OPEC measure turns out to be, in our view, a modest adjustment in production,” these analysts say.
They also note that Saudi Arabia did not want to slash its production further, which “could be seen as a sign that OPEC’s de facto leader is starting to feel the pain of its cuts.”
The discord over production quotas does not seem buried.
Angola, which was assigned a production target lower than that decided in June, rejected this new quota. “A note of protest was sent to the OPEC General Secretariat,” said the Angolan Ministry of Mineral Resources and Petroleum in a statement sent to AFP.
“Our country has been a member of (OPEC) for more than 16 years and during this period, it has fully complied with all the obligations of the Organization, while participating in the efforts made by the signatory countries […] to stabilize the market international oil company,” he insisted.
“If the announced cuts are really made, the crude supply will be in deficit and that will be good for prices,” concluded Andrew Lebow while emphasizing, however, that a slowdown in the global economy, already started in the United States and in Europe, would also weigh on prices.