ISLAMABAD
Crude oil prices edged lower on Monday amid growing concerns of a supply glut in the market, following the move of OPEC+ to extend production cuts into 2025.
As of 1310 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, shed $0.29 (-0.36 percent) to reach $80.82 a barrel. Similarly, the West Texas Intermediate (WTI), the main oil benchmark for North America, went down by $0.32 (-0.42 percent) to $76.67 a barrel.
On the other hand, the price of Arab Light decreased by $1.40 (-1.64 percent) to reach $83.73 a barrel. Similarly, the price of Russian Sokol decreased by $1.51 (-1.97 percent) to $75.21 a barrel. On the other hand, the price for Opec Basket decreased to $83.08 a barrel with a decrease of $0.92 (-1.10 percent).
The OPEC+ decision to extend crude oil production cuts is an acknowledgment that demand growth is still uncertain, but also that the group remains hopeful its bullish scenario is correct. The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, agreed at a meeting on Sunday to extend the total of 5.86 million barrels per day (bpd) of output reductions.
Within that broader figure the exporter group decided to extend 3.66 million bpd of cuts that were due to expire at the end of June 2024 until the end of next year. Additional voluntary reductions of 2.2 million bpd by eight members, including leading exporters Saudi Arabia and Russia, were prolonged by three months to the end of September.
Putting the extension of the larger section of the output cuts together with the possible rolling back of the smaller voluntary reductions shows OPEC+ is effectively betting that oil demand is going to be stronger in the second half of 2024. Keeping the 3.66 million bpd of cuts until the end of 2025 is a reflection that OPEC+ holds much of the world’s spare production capacity, but also that supply growth from outside the group has been enough to meet the increase in global demand.
Crude futures came under pressure in May amid expectations of higher-for-longer interest rates, bearish sentiment in broader financial markets, and signs of slowing demand from China. The International Energy Agency in May lowered its oil demand growth forecast for 2024 by 140,000 barrels per day to 1.1 million bpd, citing weak demand in Europe.
