Oil prices experienced a 2% decline on Thursday, extending losses following the postponement of an OPEC+ meeting. This development raised concerns that the group might not deepen output cuts in the coming year.
Price movements
Brent crude futures fell approximately 1.7%, down USD 1.40 to USD 80.56 a barrel, marking a continuation of Wednesday’s 4% drop. Meanwhile, U.S. West Texas Intermediate crude slipped 1.4%, losing USD 1.37 to reach USD 75.73, following a 5% decrease in the previous session.
OPEC+ meeting delay
In a surprising move on Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, postponed a ministerial meeting to November 30. The meeting was expected to address oil output cuts.
Producers faced challenges reaching an agreement on output levels before the initially scheduled meeting on November 26. Sources within OPEC+ suggested that the disagreement was primarily linked to Angola, Congo, and Nigeria, which sought to increase their 2024 supply quotas beyond the provisional levels agreed upon in June.
Challenges for OPEC+
Analysts expressed optimism that Nigeria could be satisfied, given its longstanding OPEC membership and improving relations with Saudi Arabia. However, bridging the gap with Angola, a historically moody member since joining in 2007, may prove more challenging.
Tamas Varga of oil broker PVM highlighted the ongoing challenges within OPEC+, emphasizing the significant task the group must tackle. He anticipated continuous volatility and a potential price swing of over USD 10 after the upcoming meeting.
Supply and demand dynamics
The concerns over OPEC+ supply coincided with data revealing an unexpected surge in U.S. crude stocks by 8.7 million barrels last week, well beyond the anticipated 1.16 million build.
On the demand side, Eurozone business activity displayed a slight improvement in November, but economic data suggested a contraction in the bloc’s economy this quarter as consumers remain cautious with spending.
Market outlook
Market expectations foresaw subdued U.S. trade on Thursday due to the Thanksgiving public holiday, adding to the overall uncertainty in the oil market.
In summary, the postponement of the OPEC+ meeting contributed to a further dip in oil prices, highlighting the ongoing challenges faced by the group in balancing global oil supply and demand dynamics.