OPEC+ Extends Oil Output Cuts, Leading to Brief Dip in Global Oil Prices
Oil prices dipped on Monday, following a surge in trading activity as investors took profits after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to extend their voluntary output cuts through mid-year. Brent crude futures dropped 41 cents to $83.14 a barrel by 1218 GMT, coming off a 2.4% increase from the previous week, while US West Texas Intermediate (WTI) futures fell 52 cents to $79.45 a barrel, after a 4.6% gain the week before.
The extended cut, totaling 2.2 million barrels per day, aims to stabilize the market amidst global economic uncertainties and increased production outside the OPEC+ group. Russia’s unexpected decision to further reduce its oil output and exports by 471,000 barrels per day in the next quarter added to the market’s surprise, largely attributed to Ukrainian drone attacks on Russian refining assets.
Despite these developments, the market’s reaction was muted, with the expectation of the OPEC+ decision largely priced in. However, the market for low-sulfur (sweet) crude is tightening, as indicated by the widening spread in Brent prices. This trend suggests that any market dips could be temporary, with the first-month Brent crude contract’s premium over the six-month contract highlighting perceived supply constraints.
OPEC+’s decision reflects a strong commitment within the group and a determination to maintain oil prices above $80 a barrel in the coming quarter. This stance is critical amid rising geopolitical tensions, including the Israel-Hamas conflict and Houthi attacks on shipping in the Red Sea, which have supported oil prices, even as concerns over economic growth persist.
