OPEC+ decision disappoints oil prices fell to two-week low | Anue Juheng-Energy

International oil prices fell for the second consecutive trading day on Friday (1st), closing the week lower. The results of the highly anticipated OPEC+ meeting failed to convince the market, and traders did not believe that oil-producing countries would fully implement further production cuts.

energy commodity prices

• West Texas Intermediate crude oil futures for January delivery fell $1.89, or 2.5%, to close at $74.07 a barrel. WTI crude oilIt fell nearly 2% this week.
• Delivered in FebruaryBrent crude oil (Brent) futures fell $1.98, or nearly 2.5%, to $78.88 a barrel, also down about 2% this week.

according toDow JonesMarket data, Brent and WTI crude oilFutures closed at their lowest since Nov. 16.

• Gasoline futures for January delivery fell 2.5% to settle at $2.12 a gallon, down 0.7% for the week.
• Delivered in JanuaryThermal Fuel FuturesPrices fell 3.4% to close at $2.66 per gallon, and were down nearly 3.7% this week.
• Natural gas futures for January delivery rose 1 cent, or 0.4%, to settle at $2.81 per million Btu, but fell 6.2% for the week.

market drivers

OPEC+ producers agreed on Thursday to reduce supply to the market by about 2.2 million barrels per day in the first quarter of next year (including the 1 million barrels per day extension of Saudi Arabia’s production cuts that the market had already expected, and the 300,000 barrels per day cut by Russia. Export amount).

However, crude oil prices fell for two consecutive days. Craig Erlam, senior market analyst at OANDA, said: “Traders seem not to believe that member states will comply with the regulations, or they think that even if they comply with the regulations, the level of production reduction is not enough. Furthermore, the production reduction news was announced by member countries alone, and there may be a lack of formal commitment. It implies that there are cracks within OPEC+, which may affect its ability to achieve its goals, let alone further expand production cuts if necessary.”

Additional voluntary production cuts were announced by individual members, raising questions about the so-called “voluntary” sincerity of smaller producers.

Troy Vincent, senior market analyst at DTN, commented that the scale of the announced cuts is obviously controversial and was proposed after many debates, which raises questions about the amount of new production cuts put together by Iraq, the United Arab Emirates (UAE), Kuwait and other countries. (about 700,000 barrels/day) will be realized because the above-mentioned countries already have some overproduction.

He pointed to recent events, including remarks by Saudi Arabia’s energy minister blaming speculators rather than a balance between supply and demand for falling oil prices, “revealing OPEC’s guidance and perceptions that are seriously deviating from reality.” After all, if the market goes as the minister puts it, If supply and demand are in balance, there is no need for the additional production cuts just announced.

At the same time, Helima Croft, global head of commodity strategy at RBC Capital Markets, reported that OPEC+’s statement on Thursday stated that “the extent of voluntary production cuts will be gradually reduced in accordance with market conditions.” On the eve of the meeting, the market had speculated that Saudi Arabia might gradually cancel its 1 million barrels per day production cut in January in order to regain market share. “We believe that saying more at this time is to suppress” Speculations that they will use these volumes to flood the market in the near future.”

Other developments

Brazil will join OPEC+ in January. Croft believes this could be an important medium-term development if Brazil eventually agrees to collective production management.

She said Brazil’s leadership aims to increase production from about 2 million barrels per day currently to 5.4 million barrels per day by 2030, which is seen as one of the most important sources of non-OPEC supply growth in the medium term.