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Sunday, March 26, 2023

Oil Prices Drop After OPEC+ Reaches Deal, to Boost Output In January

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OPEC+ has finally reached a deal on a small hike of 500,000 barrels/day in January, along with a monthly review of global market conditions and whether adjustments must be made, sending oil prices sliding as investors are forced to revise their supply forecasts.

The gradual easing falls short of what had been widely expected before this week, and oil prices are drifting lower.

The revised deal is likely to keep the oil market in deficit throughout the first quarter, allowing OPEC to drain bloated inventories.

The deal will have an impact beyond crude prices. The fortunes of the entire energy industry, from supermajors like ExxonMobil Corp. to Texas shale producers, and resource-dependent countries like Brazil and Kazakhstan, are influenced by OPEC+ decisions.

“We understand that all eyes are on us today,” Russian Deputy Prime Minister Alexander Novak said in his opening speech at Thursday’s online meeting. “I am more than sure we will take a well-grounded, balanced decision.”

The Organization of Petroleum Exporting Countries and its allies rescued the oil market earlier this year from an unprecedented slump, slashing production by 9.7 million barrels a day as the pandemic crushed demand. The cartel returned 2 million barrels a day of that output to the market in August without a hiccup, and was due to add a similar volume next month.

OPEC+ nations that have failed to fully implement their supply curbs in previous months will be required to keep making additional compensation cuts until March, said a delegate.

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