Oil prices tumbled by $3 a barrel on Monday to their lowest in nearly four months, as investors worried that a complicated OPEC+ output decision could lead to higher supplies later in the year even though demand growth has been slow, UNN writes, citing Reuters.
Details
Brent crude futures fell $2.75, or 3.4%, to.78.36 a barrel, closing below. 80 for the first time since February 7. West Texas Intermediate U.S. crude futures also closed at a nearly four-month low of.74.22 a barrel, down. 2.77, or 3.6%, from Friday. Both contracts fell by 3 3 a barrel after settlement.
OPEC + on Sunday agreed to extend most of its oil production cuts until 2025, but left room for voluntary cuts by eight members from October.
OPEC + extends oil production cuts until 202502.06.24, 22:50
Goldman Sachs analysts said the result was negative for oil prices, as the phased rejection of voluntary cuts indicates a strong desire of several OPEC+ members to return production, despite the recent increase in global oil reserves.
Other analysts also called the group's decision "bearish" for oil prices in light of high interest rates and rising production from non-OPEC producers such as the United States.
"In the end, a combination of factors came into play," said independent oil analyst Gaurav Sharma, highlighting disappointing economic performance in the U.S. and China.
"When OPEC+ made a decision over the weekend, in a fairly well-stocked crude oil market, traders took the macroeconomic picture along with a declining risk premium (with talk of a cease - fire in the Gaza Strip) and opened a short position," Sharma said.
An assistant to the Israeli prime minister confirmed on Sunday that Israel has adopted a framework agreement to end the war in Gaza, although the Israeli side called it false, the newspaper points out.
Signs of weakening demand growth have also put pressure on oil prices in recent months, with U.S. fuel consumption data in the spotlight.
On Wednesday, the US government will publish estimates of oil reserves and demand, which will show how much gasoline was consumed over the Memorial Day weekend at the beginning of the US automobile season.
"The exact numbers show that the market is well stocked," said John Kilduff, a partner at Again Capital.
"If we don't get an impressive number on Memorial Day in the US, the game will be over," Kilduff added.
U.S. gasoline futures fell more than 3% on Monday to a more than three-month low of.2.34 a gallon.
U.S. efforts to replenish the country's strategic oil reserve (SPR) may provide some support for oil prices. The United States is buying another 3 million barrels for SPR at an average price of 7 77.69 per barrel, the U.S. Department of Energy said on Monday.