Oil prices took another dive on Monday, marking a grim five-week losing streak – the longest descent since the tail end of 2021. The slump comes amidst deliberations within the OPEC+ group, where the potential for further production cuts looms large as a delayed meeting looms on the horizon this week.
Attempts to stabilize the oil market were dashed following reports from Bloomberg indicating Saudi Arabia’s pursuit for the reduction of oil production quotas by other OPEC+ members. This move has been proposed to bolster global markets, but resistance from several members has emerged.
The latest proposal would see an extension of the unilateral supply cuts of 1M bbl/day by the Saudis since July, now seeking broader backing from the cartel and its partners, as outlined in the report.
The group’s policy meeting, initially slated for November 26, has been postponed by four days as Angola and Nigeria push back against reductions to their own quota limits for 2024, established in the previous conference back in June.
Consequently, the front-month WTI crude (CL1:COM) for January delivery experienced a decline of -0.9% to $74.86/bbl, the lowest since November 16. Similarly, January Brent crude (CO1:COM) closed -0.7% to $79.98/bbl, marking its fourth consecutive daily decline.
Analysts at Eurasia Group expressed concerns over the softening fundamentals and bearish market sentiment, suggesting that OPEC+ may need to formally announce another round of cuts. They warned that if the group fails to implement an additional 1M bbl/day reduction, combined with an extension of the voluntary Saudi measure, the risk of a downward shift in the $80/bbl floor to the mid or even low $70s looms large.
The delayed OPEC meeting this week adds another layer of complexity to the group’s market management, raising questions about its cohesion and signaling a challenging road ahead in the short term, as per observations by Eurasia.