Oil Prices Stable Amid Complexities
OPEC+ Extends Output Cuts Until 2025
Oil prices remained largely unchanged on Monday as investors processed the intricate deal brokered by OPEC+ to extend various output cuts, many of which will now last until 2025.
Current Oil Price Trends
Brent crude futures for August delivery decreased by 19 cents to $80.92 a barrel at 1034 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures for July delivery dropped 23 cents to $76.76.
OPEC+ Agreement Details
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, are currently reducing output by a total of 5.86 million barrels per day (bpd), which represents about 5.7% of global demand. On Sunday, the group agreed to extend the majority of these cuts into 2025 to bolster the market amidst softer demand growth, persistently high interest rates in key Western economies, concerns over slow demand growth in China, and increasing non-OPEC oil production.
Extended and Voluntary Cuts
The deal includes extending 3.66 million bpd of cuts that were initially set to expire at the end of 2024 until the end of 2025. Additionally, it prolongs 2.2 million bpd of voluntary cuts that were due to expire at the end of this month. These cuts will now remain in place until the end of September 2025, after which they will be phased out gradually.
Market Reactions and Analyst Insights
Some analysts consider the decision incrementally bearish for oil prices, as the gradual unwinding of the 2.2 million bpd of extra cuts was anticipated. Goldman Sachs analysts noted that the detailed plan to unwind extra cuts could make it challenging to maintain low production if market conditions soften more than expected by OPEC.
Callum Macpherson, head of commodities at Investec, pointed out that the eight core OPEC+ members account for only about 30% of global oil output. This limited control makes it difficult for the group to convincingly support prices. Furthermore, achieving this deal required agreeing to output increases in 2025 in addition to the planned unwinding of voluntary cuts. The additional supply's market acceptance next year remains uncertain.
