Oil prices were little changed on Monday as investors weighed the OPEC+ producers group’s decision to extend production cuts to 2025.
Brent futures for August delivery were down 4 cents, or 0.05 percent, at $81.07 a barrel by 0344 GMT, after falling to a session low of $80.55. West Texas Intermediate (WTI) crude oil futures for July delivery slipped 1 cent, or 0.01%, to $76.98, after falling to $76.39 earlier.
Brent fell 0.6% and WTI lost 1% last week.
The Organization of the Petroleum Exporting Countries and its allies led by Russia, together known as OPEC+, are currently cutting production by a total of 5.86 million barrels per day (bpd), which is about 5.7% of global demand.
This figure includes cuts of 3.66 million bpd that were set to expire at the end of 2024, and voluntary cuts by eight members of 2.2 million bpd that are set to expire at the end of June 2024.
But on Sunday, the group agreed to extend the cuts of 3.66 million bpd for one year, until the end of 2025. It will also extend the cuts of 2.2 million bpd for three months until the end September 2024, before gradually eliminating them over one year, from October 2024 to September 2025.
Analysts say investors will take time to calculate the production cut and digest the decision.
“Overall, I think the decision is slightly bearish, as the market did not expect OPEC+ to start cutting production in the fourth quarter,” said Vandana Hari, founder of the analytics provider of the oil market Vanda Insights.
Analysts at Goldman Sachs echoed the sentiment, saying the meeting was seen as bearish despite the extension of production cuts, given that eight OPEC+ countries had already signaled plans to phase out the 2.2 million bpd of voluntary reductions during the period October 2024 to September 2025.
“Communicating a surprisingly detailed default plan to reverse further cuts makes it harder to maintain low production if the market proves weaker than OPEC’s bullish expectations,” the analysts said.
“Communication of a phased disengagement reflects a strong desire to bring back production from multiple members given high reserve capacity.
In the Middle East, mediators in the Gaza conflict have urged Israel and Hamas to finalize a ceasefire and hostage release deal presented by U.S. President Joe Biden, although Israel has said it There would be no official end to the war as long as Hamas retained power. Israel said it was evaluating a governing alternative to the Iran-backed group.
An aide to Prime Minister Benjamin Netanyahu said Israel had agreed to a framework deal to end the Gaza war, but said it was imperfect and still needed much work. (Reporting by Mohi Narayan in New Delhi and Emily Chow in Singapore; Editing by Jamie Freed and Rashmi Aich)
