Oil falls amid ongoing uncertainty over OPEC+ supply cuts
Oil futures initially rose on Monday but reversed course, facing continued pressure from the OPEC+ decision and uncertainty about global fuel demand growth. However, the potential for supply disruptions due to the Middle East conflict limited the losses.
Brent crude futures declined by 0.6%, or 49 cents, reaching $78.39 a barrel by 0406 GMT. Meanwhile, U.S. West Texas Intermediate crude futures stood at $73.65 a barrel, down 0.6%, or 42 cents.
“Crude seems to be under continued pressure from the OPEC+ decision … Some degree of discounting of the deeper OPEC+ cuts is justified, but as of now, the crude complex has completely disregarded them,” remarked Vandana Hari, founder of oil market analysis provider Vanda Insights.
Oil prices experienced a decline of over 2% last week, driven by investor skepticism about the extent of supply cuts by OPEC+ and concerns about sluggish global manufacturing activity.
The voluntary nature of the OPEC+ cuts announced on Thursday raised doubts about full implementation by producers. Investors were uncertain about the measurement criteria for these cuts.
Geopolitical concerns took center stage as fighting resumed in Gaza, and three commercial vessels were attacked in international waters in the southern Red Sea, according to the U.S. military on Sunday. Yemen’s Houthi group claimed responsibility for drone and missile attacks on two Israeli vessels in the same area.
The resumption of the Israel-Hamas conflict contributed to the bullish momentum for oil prices, as noted by CMC Markets analyst Tina Teng.
“However, oil prices may continue to be under pressure for the time being due to China’s disappointing economic recovery and the ramp-up of U.S. production,” noted Teng.
U.S. oil rigs increased by five to reach 505 this week, marking their highest count since September, according to the report from energy services firm Baker Hughes on Friday.
Western countries have intensified efforts to enforce the $60 a barrel price cap on seaborne shipments of Russian oil, a measure imposed to penalize Moscow for its actions in the conflict with Ukraine.
On Friday, Washington imposed additional sanctions on three entities and three oil tankers.
The White House announced on Friday that it is ready to pause sanctions relief for OPEC member Venezuela in the coming days unless there is additional progress on the release of Venezuelan political prisoners and wrongfully detained Americans. In the meantime, India has resumed purchasing Venezuelan oil.
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