– Brent, WTI futures fall to near four-month low
– OPEC+ agreed to extend supply cuts into 2025
– OPEC+ deal allows unwinding of voluntary cuts from Oct.
– US fuel demand in focus, key holiday weekend data due Wednesday
New York — Oil prices tumbled more than $2 a barrel on Monday to multi-month lows, as investors worried about the demand outlook and took a complicated OPEC+ output decision as a sign that members of the producer group were eager to export more crude.
OPEC+ on Sunday agreed to extend most of its deep oil output cuts into 2025 but left room for voluntary cuts from eight core members to be gradually unwound from October onwards. The group also agreed to a new output target for the United Arab Emirates, which has been pushing for higher quota.
“There’s a lack of clarity and the market is concluding, with the top-up in UAE production, that there is discord within the group amid a push to produce and export more oil,” said John Kilduff, partner at Again Capital.
Brent crude futures fell by $2.81, or 3.5%, to $78.30 a barrel by 1:30 p.m. ET (1730 GMT). U.S. West Texas Intermediate crude futures were $2.85, or 3.7%, lower at $74.14 a barrel. Both contracts hit their lowest since early February.
Other analysts also called the group’s decision incrementally bearish for oil prices in light of high interest rates and rising output from non-OPEC producers like the U.S.
“Ultimately, a combination of factors has come into play,” independent oil analyst Gaurav Sharma said, highlighting disappointing economic indicators in the U.S. and China.
“So, when OPEC+ took the decision it did over the weekend, in a reasonably well supplied crude market, traders factored in the macro picture alongside a dwindling risk premium (with talk of a ceasefire in Gaza) and went net short,” Sharma said.
An aide to the Israeli Prime Minister confirmed on Sunday that Israel had accepted a framework deal being advanced by the U.S. for winding down the Gaza war, although the Israeli side described it as a flawed deal.
Signs of weakening demand growth have also weighed on oil prices in recent months, with data on U.S. fuel consumption in focus.
The U.S. Energy Information Administration will release estimates of oil stocks and fuel demand on Wednesday, which will show how much gasoline was consumed around the Memorial Day weekend, the start to U.S. driving season.
“The hard numbers are that the market is well-supplied,” Kilduff said. “If we do not get a spectacular number on Memorial Day in the U.S., that’s going to be game over,” he added.
U.S. gasoline futures were down over 3% on Monday to an over three-month low of $2.34 a gallon.
*Shariq Khan, Natalie Grover, Mohi Narayan & Emily Chow, editing: David Goodman, Kirsten Donovan, Sriraj Kalluvila, David Gregorio & Deepa Babington – Reuters
This article was originally posted at sweetcrudereports.com
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