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Oil futures rose Friday, attempting to find their footing and on track for weekly gains, after slumping the previous session following the outcome of an eagerly awaited OPEC+ meeting that left traders unconvinced producers will fully deliver additional production cuts.
Price action
-
West Texas Intermediate crude for January delivery
CL.1,
+0.86% CLF24,
+0.87%
rose 19 cents, or 0.3%, to $76.15 a barrel on the New York Mercantile Exchange, on track for a 0.8% weekly rise. -
February Brent crude
BRN00,
+0.66% BRNG24,
+0.66% ,
the global benchmark, ws up 15 cents, or 0.2%, at $81.01 a barrel on ICE Futures Europe, headed for a 0.7% weekly rise.
Market drivers
Crude slumped Thursday after OPEC+ producers agreed to cut around 2.2 million barrels per day (bpd) of crude from the market in the first quarter of next year, a figure that included a widely expected extension of Saudi Arabia’s 1 mbd voluntary cut and Russia’s 300,000 barrel a day cut to crude supplies.
But the additional cuts, which were left to be announced by individual members, disappointed traders who questioned the enforcement of the reductions by smaller producers given their voluntary nature.
Check out: Why oil prices dropped despite OPEC+ pledge to make additional production cuts early next year
“The lack of clarity on all OPEC+ voluntary cuts was a modestly bearish surprise and largely the reason the market rolled over after the meeting,” analysts at Sevens Report Research wrote in a note.
Meanwhile, there were other constructive developments, including language in the OPEC+ statement that the voluntary cuts would be wound down “gradually subject to market conditions,” Helima Croft, global head of commodity strategy at RBC Capital Markets, said in a note.
In the run-up to the meeting, there was speculation Saudi Arabia could phase back its 1 mbd cut in January to regain market share, Croft noted. “We see this added timing language as an attempt to squash speculation that they will flood the market with those barrels at some point in the near future.”
In other developments, Brazil said it would join OPEC+ in January, which could be an important medium-term development if the South American producer eventually agrees to collective output management, Croft said.
Brazil’s leadership has targeted 5.4 mbd of production by the end of the decade, up around 2 mbd from current levels, and is seen as one of the most significant sources of non-OPEC supply growth over the medium term, she said.
