OPEC and Non-OPEC Oil-Producing Countries’ Production Reduction Measures Fall Short, Causing International Oil Prices to Drop
Xinhua News Agency, New York, December 1 – The recent production reduction measures introduced by major oil-producing countries, specifically the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries, have fallen short of market expectations. Consequently, international oil prices fell instead of rising, causing market uncertainty.
At the close of the day, the price of light crude oil futures for delivery in January 2024 on the New York Mercantile Exchange dropped by US$1.90 to close at US$75.96 per barrel, a decrease of 2.44%. Similarly, the price of London Brent crude oil futures for delivery in January 2024 fell 27 cents to close at $82.83 per barrel, a decrease of 0.32%.
At the 36th ministerial meeting held via video, many OPEC and non-OPEC oil-producing countries agreed to continue voluntary production reduction in the first quarter of next year. The total production reduction will average 2.2 million barrels per day, lower than market expectations. Saudi Arabia, Russia, and other OPEC+ members have committed to further extend or increase voluntary production cuts. Additionally, OPEC made adjustments to the crude oil production caps of specific African countries and invited Brazil to join “OPEC+”.
However, the actual new production reduction of “OPEC+” this time is lower than the previous market expectations, leading to a dampened market sentiment. Furthermore, disagreements within “OPEC+” have cast doubts on the market’s ability to boost international oil prices.
Analysts attribute the drop in oil prices to factors such as unexpectedly high U.S. crude oil inventories and anticipated global economic growth slowdown, as well as doubts surrounding the ability of oil-producing countries to implement the announced production cuts.
Rob Haworth, an investment strategist at U.S. Bank Wealth Management, expressed concerns about the ability of oil-producing countries to enforce production cuts and the prospects for global oil demand growth. On the other hand, Phil Flynn, a senior market analyst at Price Futures Group in the United States, highlighted the voluntary nature of the promised production cuts, stating, “We’re getting a promise instead of a clear answer, and that’s unnerving.”
As “OPEC+” seeks to adjust its strategy, it will need to strengthen coordination and communication among members while attracting important oil-producing countries like Brazil to reduce external constraints and bolster its global market influence.
In conclusion, the recent shortfall in production reduction measures has left the global oil market in a state of uncertainty, with international oil prices experiencing unexpected decreases. Market participants continue to monitor developments within “OPEC+” and the global economy to gauge future oil price movements.