Oil prices recover from slump after underwhelming OPEC+ cuts

An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. REUTERS/Tatiana Meel/File photo

Oil prices pared losses on Friday, after falling sharply in early trade and by over 2 percent on Thursday on perceptions that the voluntary oil output cuts agreed by OPEC+ producers were underwhelming.

Brent crude futures for February rose 6 cents, or 0.1 percent, to $80.92 a barrel by 0820 GMT. U.S. West Texas Intermediate crude futures rose 17 cents, or 0.2 percent, to $76.13.

OPEC+, which pumps over 40 percent of the world’s oil, is focusing on reducing output as prices have fallen from about $98 in late September amid concerns over weaker economic growth in 2024 and expectations of a supply surplus.

Saudi Arabia, Russia and other members of OPEC+ agreed to voluntary output reduction of 900,000 bpd in addition to extending 1.3 million bpd in production cuts already in place. Delegates had earlier discussed as much as 2 million bpd in new output curbs.

Goldman Sachs said its December forecast for Brent was “moderately tilted” to the downside of its previously estimated range, calling the oil producers’ move a “temporary response,” and “difficult to implement.”

“The market had started to price in a large probability of extra cuts, including a potential longer-lasting and official non-voluntary cut,” Goldman said in a note on Friday, but kept its 2024 price outlook due to an expected slowdown in U.S. supply growth and low OPEC supply.

Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan and Algeria were among producers who said cuts, which amounted to 2.2 million bpd in total, will be unwound gradually after the first quarter, market conditions permitting.

Separately, Brazil said on Thursday it would join the OPEC+ next year, though such a move wouldn’t bind the south America’s largest country to production cuts.