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Short Term Demand Boosts Oil Market

Short Term Demand Boosts Oil Market

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Tom Kool

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations

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Oil Prices Shed Over 3% As Market Digests OPEC+ Move


Brent crude was trading down well over 3% on Monday, marking the first time the global benchmark has been below $80 since February, with the U.S. crude benchmark down over 3.5% following the OPEC+ agreement to start phasing out voluntary cuts in October. 

On Monday at 11:54 a.m. ET, Brent crude was trading down 3.29% at $78.44, for a loss of $2.67 on the day. West Texas Intermediate (WTI) was down 3.51% at $74.29 per barrel, for a loss of $2.70 per barrel. 

On Sunday, OPEC+ agreed to extend both voluntary and group-wide production cuts until 2025, with Energy Intelligence’s Amena Bakr noting that the voluntary cuts would be extended until the third quarter of 2024, after which the countries currently cutting would begin to bring back production if the market conditions are right.

“We are waiting for interest rates to come down and a better trajectory when it comes to economic growth ... not pockets of growth here and there,” Reuters cited Saudi Arabia’s energy minister Abdulaziz bin Salman as saying. 

Oil prices have responded in a downward spiral due to the fact that the majority of the total cuts from both categories come from the voluntary scheme. Total cuts are 3.66 million barrels per day, while 2.2 million bpd of that is accounted for by the voluntary scheme. 

Additionally, the UAE’s production quota was adjusted upwards with a baseline of 300,000 bpd. 

“Some people read the OPEC statement, particularly the part about the adding barrels back from the voluntary cut, as bearish,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC. 

Markets are also being cautioned that the latest OPEC+ decisions could be reversed, depending on market conditions. 

“They were pretty clear that this is going to be data dependent. As we get to the end of August, if the fundamental picture looks worse than what we have now, they would pause that addition,” Croft added.

By Tom Kool for Oilprice.com

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  • George Doolittle on June 03 2024 said:
    Battery electrics might be starting to have a huge impact on oil demand in the USA. US vehicle sales continue to soar for 2024 in particular Toyota, Honda, Mazda, Nissan, Subaru, Lexus making hybrids go far more mainstream than ever as well. Plus the US economy might be slowing down dramatically thanks to #irony high oil prices but also high interest rates going on forever now. It's possible a re-run of the 2022 #Bank_Run plays out this Year as well #loss_of_confidence

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