Doubts About OPEC Commitment Lead to Slide in US Crude Oil Prices

US crude oil prices dropped on Thursday, as traders grew increasingly skeptical about OPEC+'s ability to deliver on their promised production cuts. Market participants are concerned that the voluntary nature of the cuts may not translate into substantive action from the member countries.

Crude Market Responses

The January contract for West Texas Intermediate (WTI) crude slumped by $1.90, or 2.44%, closing at $75.96 per barrel. Meanwhile, the Brent crude counterpart for January saw a modest decline of 27 cents or 0.17%, to end at $82.83 per barrel.

OPEC+ Production Cut Pledge

OPEC+ members have announced a voluntary reduction of 2.2 million barrels per day for the first quarter of 2024. Despite this, market sentiment has been dampened as the group failed to reach a unanimous agreement on these cuts, leading to individual member countries undertaking the reductions independently.

Among the contributors, Saudi Arabia agreed to maintain a voluntary cut of 1 million barrels per day. Other countries like Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman have also announced their respective cuts, with Russia voluntarily increasing its cut to 500,000 barrels per day until the end of the first quarter.

Market Analyst Insights

Analysts are expressing concern that the voluntary nature of the cuts raises questions about the actual impact on production. Traders worry that without a binding commitment, the proposed reductions may not materialize as per expectations, thus influencing oil prices negatively.

Oil, OPEC, Trading