Oil mixed as OPEC+ supply uncertainties blur outlook

By Sibel Morrow

Oil prices were mixed in early trade on Wednesday as markets sought direction amid uncertainties over OPEC+ supply cuts and a surprise build in US crude oil inventories that cast doubts on the country’s demand outlook.

International benchmark crude Brent traded at $77.28 per barrel at 9.23 a.m. local time (0623 GMT), a 0.10% increase from the closing price of $77.20 a barrel in the previous trading session on Tuesday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $72.30 per barrel, down 0.02% from Tuesday’s close of $72.32 per barrel.

Both benchmarks have fluctuated widely so far this week as markets weigh the effectiveness of OPEC+ production cuts imposed during the group’s meeting last week.

After failing to agree on collective cuts, several members of OPEC+ announced their voluntary production cuts, amounting to 2.2 million barrels per day (bpd) for the first quarter of 2024. Saudi Arabia contributed a cutback of 1 million bpd by extending its current cuts by three more months, and Russia agreed to two “export” cuts of 300,000 bpd of crude and 200,000 bpd of fuel oil.

Amid expectations of a supply build during the first quarter of 2024, the market reaction to the OPEC+ cuts was not as the group expected. Prices have not reached $80 per barrel, the group’s unofficial floor price, to keep the budget balanced.

Saudi Energy Minister Abdulaziz bin Salman assured that the previously agreed reductions of more than 2 million bpd would be completely implemented and said OPEC+'s oil output cutbacks may continue throughout the first quarter if needed.

Salman voiced optimism that the planned reductions would effectively handle the estimated buildup of inventories in the first quarter.

An unexpected increase in US crude oil inventories supported downward price movements, reflecting weak demand conditions in the world’s largest oil-consuming country.

The American Petroleum Institute (API) late Tuesday announced an estimated increase of nearly 600,000 barrels in US crude oil inventories, against the market expectation of a decline of 2.6 million barrels.

Prices may decrease if the US Energy Information Administration (EIA) confirms the stock builds when it releases actual data on oil stocks later on Wednesday.