Crude oil prices started the week with a gain of over $1 per barrel following reports that OPEC+ had decided to postpone a planned partial rollback of its production cuts.
The group was supposed to bring back some 180,000 barrels daily in supply from December but it had conditioned that move on the price environment. If oil prices were right, they would bring back the supply. If prices remained depressed, as they have, the rollback would be pushed back.
While the OPEC+ decision was anything but surprising, its impact on oil prices was immediate, with Brent crude trading at $74.37 per barrel at the time of writing, and West Texas Intermediate changing hands at $70.75 per barrel.
“While the delay until January does not change fundamentals significantly, it does potentially leave the market having to rethink the strategy of OPEC+,” ING’s Warren Patterson and Ewa Manthey said in a note following the OPEC+ announcement.
Citing recent reports about Saudi Arabia’s unhappiness with lost market share as a result of the cuts and its displeasure with production cut laggards, the ING analysts noted they may have underestimated Saudi Arabia’s—and OPEC’s—desire to boost prices. ING and other forecasters had assumed the Saudis and OPEC would rather risk even lower prices with additional supply in order to regain market share. This clearly wasn’t the case.
Therefore, “this delayed supply increase means that maybe the group are more willing to support prices than many believe,” Patterson and Manthey wrote, adding “However, our balance continues to show that the market will be in surplus through 2025 unless OPEC+ continues with cuts through next year.”
Along the same lines, IG analyst Yeap Jun Rong told Reuters it was doubtful whether the price spike following the OPEC+ decision would last long. According to him, prices would encounter resistance around $78 per barrel.
