Reviewing OPEC+ production cuts and market dynamics
Since the beginning of the year, WTI has declined by more than 9%
WTI has recorded a decline for the seventh consecutive month
At the time of this report's release, WTI is trading below $74 per barrel
Brent is currently trading below $80 per barrel
OPEC+ to extend voluntary cuts until 2024
OPEC+ has announced its decision to extend the voluntary production cuts until the end of 2024. Moreover, the Kingdom of Saudi Arabia will implement an additional reduction of 500,000 barrels per day. Saudi Energy Minister Prince Abdulaziz bin Salman has expressed his commitment to doing "whatever is necessary" to achieve market stability, following the recent failure to raise oil prices through a reduction of one million barrels. As the group is responsible for about 40% of global oil production, its decisions have a direct impact on the prices and movements of this valuable resource. Some sources within OPEC+ suggest that if new production baselines are agreed upon, the group may renew its policy for 2023 and implement further production cuts in 2024.
A review of oil markets recent developments
In April 2023, OPEC+ announced a reduction in oil production of over one million barrels, effective from May 2023. Consequently, the energy markets experienced significant fluctuations, with West Texas crude opening on April 3rd with a positive price gap of over 6%. The price surged from $75.65 per barrel to $81 per barrel. However, it later declined due to the strengthening of the US dollar since the beginning of May. The decline was also influenced by diverging opinions on the US Federal Reserve's tightening policy and economic data, which indicated a decrease to 49.2 in April 2023. Furthermore, the Chinese Bureau of Statistics reported an unexpected fall in manufacturing PMI to a five-month low of 48.8 in May 2023, reflecting contraction in factory activity for the second consecutive month amid weak demand.
The current week witnessed a positive price gap in oil movements, with both WTI and Brent crude experiencing a rise of over 1%.