Following a significant decline in early trading and a drop of more than two percent on Thursday, oil prices rebounded on Friday. This was due to the belief that the voluntary oil output cutbacks agreed upon by OPEC+ countries were not as impressive as expected.
At 08:20 GMT, the price of a barrel of Brent oil futures for February increased by 6 cents, or 0.1%, to $80.92 a barrel. The price of West Texas Intermediate oil futures in the United States surged by 17 cents, or 0.2%, to $76.13.
OPEC+, which is responsible for pumping more than forty percent of the world’s oil, is concentrating on lowering production since prices dropped from over $98 in late September. This is due to fears regarding slower economic development in 2024 as well as anticipation of a supply surplus.
Not only did Saudi Arabia, Russia, and other members of OPEC+ agree to voluntarily reduce their output by 900,000 barrels per day, but they also decided to prolong the production cutbacks that were already in place by 1.3 million barrels per day. The delegates had already considered potential output limitations that might go as high as 2 million barrels per day.
Goldman Sachs stated that their projection for Brent in December was “moderately tilted” to the downside of its previously predicted range. The company referred to the action taken by oil producers as a “temporary response” and described it as “difficult to implement.”
Goldman noted in a note that was released on Friday that “the market had started to price in a large probability of additional cuts, including a potential longer-lasting and official non-voluntary cut.” However, the company maintained its pricing prediction for 2024 owing to an anticipated slowdown in the expansion of the United States’ production and a low supply from OPEC.
A number of producers, including Saudi Arabia, Russia, the United Arab Emirates, Iraq, Kuwait, Kazakhstan, and Algeria, have stated that they intend to progressively unwind their cutbacks, which cumulatively totaled 2.2 million barrels per day, after the first quarter, provided that market circumstances remain favorable.
In a separate development, Brazil said on Thursday that it will become a member of the OPEC+ in the following year. However, this decision would not obligate the largest country in South America to reduce its output.
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