Global oil prices continue to dip amidst ongoing OPEC+ concerns

December 05, 2023 (MLN): Global oil prices continued their downward trajectory on Tuesday due to uncertainty over the depth and time period of OPEC+ production cuts, coupled with a weak demand outlook.

Brent crude is currently trading at $78.06 per barrel, down by 0.1% on the day.

While West Texas Intermediate crude (WTI) is trading at $73.24 per barrel, down by 0.17% on the day.

 It is important to mention that both benchmarks are on track for their fourth straight decline amid persistent pressure from the OPEC+ decision.

"The market has decided (OPEC+ production plans) are not going to have that much of an impact. It's more style over substance," said Andrew Lipow, president of Lipow Oil Associates, said about crude traders on Monday, as Reuters reported.

Saudi Arabia's energy minister Prince Abdulaziz bin Salman said in a televised interview with Bloomberg on Monday that he expected OPEC and its allies to bring about the 2.2 million in crude oil production cuts announced last week.

"I honestly believe that the delivery of the 2.2 will happen," Bin Salman said. "I honestly believe that will continue to happen (and the) 2 million will overcome even the huge inventory build that usually happens in the first quarter."

OPEC+ last week announced production cuts that are voluntary in nature, raising doubts about whether or not producers would fully implement them. Investors were also unsure about how the cuts would be measured.

Traders over the past five months have waited to see if cuts in production as well as predicted changes in demand would come to fruition, said Zane Curry, vice president of markets and research for Mobius Risk Group.

"We've become Missouri, the Show-Me state," Curry said.

Surveys on Friday showed global manufacturing activity remained weak in November on soft demand, with eurozone factory activity contracting, while there were mixed signs on the strength of China's economy.

"The OPEC+ 'deal' last week was unconvincing, to say the least," said Craig Erlam, analyst at brokerage OANDA. "And with markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn't go far enough."

Elsewhere, Western countries have stepped up efforts to enforce the $60 a barrel price cap on seaborne shipments of Russian oil imposed to punish Moscow for its war in Ukraine.

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