Energy
Monday, June 3rd, 2024 3:32 pm EDT
Key Points
- U.S. crude oil experienced a significant decline of more than 3% following the announcement by OPEC+ regarding the gradual elimination of voluntary production cuts totaling 2.2 million barrels per day.
- Led by Saudi Arabia and Russia, a coalition of eight OPEC+ members disclosed their plan to phase out these cuts over 12 months, starting in October, with potential reversals subject to market conditions.
- Energy prices reflected this announcement, with notable decreases in West Texas Intermediate, Brent, and RBOB Gasoline contracts, while natural gas saw an increase. Analysts expressed concerns over the impact on the oil futures curve, with Bob Yawger noting the potential negative effects on contracts such as December 2024 due to market uncertainty surrounding the OPEC+ decision.
U.S. crude oil experienced a significant drop of over 3% following an announcement by OPEC+ regarding the gradual elimination of voluntary production cuts totaling 2.2 million barrels per day. Led by Saudi Arabia and Russia, a coalition of eight OPEC+ members revealed their intention to phase out these cuts over a 12-month period, commencing in October, with the possibility of reversals based on market conditions. The impact of this decision was reflected in energy prices, with West Texas Intermediate’s July contract falling to $74.27 a barrel, a decline of $2.7 or 3.5%, while Brent’s August contract decreased to $78.54 a barrel, down $2.57 or 3.2%. The RBOB Gasoline July contract also experienced a downturn to $2.34 a gallon, a decrease of 2.9%. Despite these fluctuations, U.S. crude oil has seen a year-to-date gain of 3.7%. Helima Croft, head of global commodity strategy at RBC Capital Markets, noted that the OPEC statement, particularly regarding the reinstatement of barrels from voluntary cuts, was perceived by some as bearish. However, she emphasized the data dependency of this decision, suggesting a potential pause in the addition of barrels if the fundamental picture worsens by the end of August. The phased plan entails the return of over 500,000 barrels per day to the market by December, with a further 1.8 million barrels per day scheduled by June of the following year. Bob Yawger, a futures analyst at Mizuho, highlighted the weakening structure of the market, indicating that the OPEC+ announcement had adversely affected the back of the oil futures curve. This sentiment could discourage investment in later contracts, potentially impacting contracts such as December 2024.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/06/03/oil-prices-little-changed-after-opec-extends-output-cuts.html
