Oil Dips Below $80 Despite OPEC+ Decision to Extend Supply Cut
The market price of crude oil came under pressure in the global commodity market, fell below $80 per barrel, despite the Organization of Petroleum Exporting Countries and Allies (OPEC+) decision to extend supply cuts.
Yesterday, price action in the oil market clearly showed that the market was disappointed by the decision taken by OPEC+ over the weekend, ING commodities strategists said in a note on Tuesday. Brent crude price settled almost 3.39% lower on the day and below US$79 per barrel – a level last seen in February, according to ING.
The American benchmark West Texas Intermediate (WTI) traded at $77.11 per barrel at the same time, a 0.16% increase from the previous session that closed at $76.99 per barrel.
While the extension of additional voluntary supply cuts into 3Q-2024 leaves the market in deficit over the upcoming quarter, the gradual return of 2.2 million barrels per day of supply from October 2024 through to September 2025 risks leaving the market in surplus through 2025.
Unwinding of these additional voluntary cuts will leave the market in a small surplus next year, according to ING note. After the meeting on Sunday, OPEC+ made it clear that the return of these barrels to the market can be paused if market conditions do not allow for this additional supply.
“One must question how long some members will be willing to hold a substantial amount of supply from the market and give market share away to non-OPEC+ producers. The various cuts from the group currently add up to almost 6 million barrels per day.”.
Bloomberg’s survey shows that OPEC output averaged 26.96m b/d in May, up 60,000 barrels per day (b/d) month on month. The numbers show that Iraqi and UAE output was a combined 458k b/d above their target level.
There are still no signs of Iraq compensating for its overproduction since the start of the year. The lack of compliance by some members only reinforces the view that OPEC+ could struggle to continue with full cuts into 2025 if needed, ING said. #Oil Dips Below $80 Despite OPEC+ Decision to Extend Supply Cut Export: Afreximbank Begins Development of Quality Assurance Centre in Imo
