Oil gains slightly after OPEC+ cuts to be extended 📈

11:07 AM 4 March 2024

Oil futures are seeing slight increases today, following yesterday's announcement by OPEC+ producers of an extension of production cuts until the end of the second quarter of the year. It seems that the market had at least partially anticipated such a decision. Brent and WTI are gaining slightly today, by about 0.4%, but after a longer consolidation, prices have slowly climbed to multi-month highs. According to ANZ analysts, certain signs of tight supplies in the physical market may support oil, but it seems that the increases are due to the continuation of cuts, coupled with the tense situation in the Middle East, which (so far) seems to be staying within bounds that the market would consider an emergency.

  • The total cuts by OPEC+ will amount to 2.2 million barrels per day (1 million barrels for Saudi Arabia alone).

  • Russia will reduce its oil production and export by an additional 471,000 barrels per day in the second quarter, in coordination with some OPEC+ countries, as informed by the country's Deputy Prime Minister, Alexander Novak. The country will first make cuts in exports, to achieve cuts solely in production by June;

  • According to Rystad Energy, the OPEC+ cuts will lead to lower group production, around 34.6 million barrels per day in the second quarter, compared to the previous forecast of an increase to 36 million barrels, which assumed that producers would not cut supply;

  • Analysts also emphasized that OPEC+ probably wants to strongly defend the lower price limit of $80 per barrel in the second quarter and has again shown unity after this was questioned in November when Angola left the group.

  • On the other hand, the market still does not see the risk of a wider conflict in the Middle East. U.S. Vice President Kamala Harris demanded on Sunday an immediate ceasefire from Hamas for 6 weeks; she also pressed Israel for humanitarian aid in the Gaza Strip. On Saturday, the U.S. announced that Israel had agreed to a framework ceasefire agreement before the start of Ramadan (which is a week away).

  • Attention is rather shifting to the Red Sea, where, as a result of Houthi attacks, the British cargo ship Rubymar sank over the weekend. In the background, geopolitics, as well as the 'soft landing' scenario, may support oil, indicating risks to supply and consistently, fairly high demand.

OIL (D1 Chart)

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