- Oil prices increased slightly following the expected extension of voluntary output cuts.
- OPEC+ cuts would lead to lower production from the group at 34.6 million bpd in the second quarter.
Oil prices increased slightly on Monday, March 4, following the widely expected extension of voluntary output cuts by the OPEC+ producer group.
Brent futures climbed 14 cents to $83.69 a barrel today after rising 2.4 per cent last week. US West Texas Intermediate (WTI) inched up 3 cents to $80 a barrel, following a 4.6 per cent gain last week.
ANZ analysts said, “Signs of tightness in the physical market continue to push crude oil higher. Output cuts by the OPEC+ alliance continue to reduce supply as the market worries about the renewed tensions in the Middle East.”
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are extending their voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter. This will help cushion the market amid global economic concerns and rising output.
Also, Russia will cut its oil output and exports by an additional 471,000 bpd in the second quarter in coordination with some OPEC+ participating countries, its Deputy Prime Minister Alexander Novak said recently.
While there has been little price movement because of the OPEC+ decision, low-sulphur, or sweet, crude markets are tightening, widening Brent spreads, traders said.
Jorge Leon, a senior vice president at consultancy Rystad Energy, noted that the OPEC+ cuts would lead to lower production from the group at 34.6 million bpd in the second quarter against an earlier forecast that output could rise above 36 million bpd in May as producers unwind supply cuts.
He said, “This new move by OPEC+ clearly shows strong unity within the group, something that was put into question after the November ministerial meeting, which saw Angola leaving OPEC.”
Furthermore, rising geopolitical tensions due to the Israel-Hamas conflict and Houthi attacks on Red Sea shipping have supported oil prices in 2024, although concern about economic growth has weighed. Yemen’s Iran-backed Houthis vowed to continue targeting British ships in the Gulf of Aden following the sinking of UK-owned vessel Rubymar.