Energy
Friday, December 1st, 2023 5:23 pm EDT
Key Points
- Voluntary Production Cuts by OPEC+ Members: OPEC+ oil-producing countries have announced voluntary production cuts totaling 2.2 million barrels per day for the first quarter of 2024. While the oil cartel did not formally endorse these cuts in its statement, individual countries, including Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, pledged to reduce their oil output during this period.
- Saudi Arabia’s Leadership in Cuts: Saudi Arabia, the largest member and a key player in OPEC, is leading the voluntary production cuts. Riyadh agreed to extend its existing voluntary production cut of 1 million barrels per day, which has been in place since July, until the end of the first quarter of 2024. Other significant contributors to the cuts include Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman.
- Market Response and Expectations: The announcement of voluntary cuts has fueled expectations of a rise in oil prices in the new year. Market analysts highlight the importance of compliance across all OPEC nations for building trust, with concerns about fragmented announcements and the need for comprehensive adherence to the proposed cuts. If OPEC+ members fulfill their pledged cuts, crude prices are expected to climb. Analysts from UBS and Goldman Sachs anticipate a boost in oil prices, with UBS strategist Giovanni Staunovo noting that the gradual return of removed barrels after the first quarter could help keep the oil market in deficit in the first half of 2024. Both UBS and Goldman Sachs expect the OPEC+ group to maintain Brent oil prices in the $80-$100 range in 2024. As of the latest trading, global benchmark Brent crude futures were marginally lower at $80.66 a barrel, while U.S. West Texas Intermediate crude futures slipped slightly to $75.93 per barrel.
Oil prices are anticipated to experience an upward trend in the coming year as several OPEC+ oil-producing countries have voluntarily committed to reducing output. While the official statement from the oil cartel did not formally endorse production cuts, individual countries revealed voluntary reductions totaling 2.2 million barrels per day for the first quarter of 2024.
Saudi Arabia, a key player in OPEC, took the lead in the cuts by agreeing to extend its voluntary production cut of 1 million barrels per day until the end of Q1 2024. Russia also pledged to reduce its supply by 300,000 barrels per day of crude and 200,000 barrels per day of petroleum products during the same period. Other countries contributing to the voluntary cuts include Iraq (223,000 bpd), the United Arab Emirates (163,000 bpd), Kuwait (135,000 bpd), Kazakhstan (82,000 bpd), Algeria (51,000 bpd), and Oman (42,000 bpd).
The market response to these announcements has been influenced by concerns about compliance. Bill Perkins, CEO and head trader of Skylar Capital Management, emphasized the importance of comprehensive compliance across all OPEC nations for market trust. The fragmented nature of the announcements, with individual member states releasing separate statements, has added to trader confusion and skepticism.
Analysts suggest that if OPEC+ members adhere to their pledged cuts, crude prices are likely to witness an increase. UBS strategist Giovanni Staunovo noted that the gradual return of the removed barrels after the first quarter should help keep the oil market in deficit in the first half of 2024, potentially leading to rising prices in the undersupplied oil market.
Goldman Sachs also predicts higher prices and expects OPEC+ to maintain Brent oil prices in the $80-$100 range in 2024, assuming compliance with the proposed cuts. The bank estimates a modest boost to Brent Dec24 prices, reflecting the impact of the additional cut.
As of the latest trading, global benchmark Brent crude futures were marginally lower at $80.66 a barrel, while U.S. West Texas Intermediate crude futures slipped slightly to $75.93 per barrel. Analysts and traders are closely monitoring compliance and market dynamics, anticipating the potential impact of the voluntary production cuts on oil prices in the coming months.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/01/oil-prices-set-to-rise-in-2024-after-opec-voluntary-cuts.html
