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 $2.76, or 3.4%, to $78.35 a barrel by 11:37 a.m. ET (1539 GMT). US West Texas Intermediate crude futures were $2.80, or 3.6%, lower at $74.19 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 US
“The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations,” Goldman Sachs analysts said.
Signs of weakening demand growth have weighed on oil prices, data on US fuel consumption in focus. The US 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 US 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 US, that’s going to be game over,” he added.
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