Oil prices edged lower Monday after oil cartel OPEC+ agreed to extend voluntary output reductions until the second quarter in an effort to support the short-term stability of crude markets, according to CNBC.
Global benchmark Brent slipped 0.05% to $83.52 a barrel Monday, while U.S. West Texas Intermediate futures traded down 0.19% at $79.82 per barrel.
OPEC+ announced on Sunday that the 2.2 million barrels per day of voluntary output cuts that were planned for the first quarter of this year will continue into the next quarter.
OPEC+ kingpin and de facto leader Saudi Arabia said it will prolong its voluntary cut of 1 million barrels per day until the end of the second quarter, state-owned Saudi Press Agency said Sunday. Riyadh’s crude production will stand at approximately 9 million barrels per day until the end of June.
Russia, another OPEC+ heavyweight, will slash its production and export supplies by a combined 471,000 barrels per day until the end of June. Moscow had volunteered to reduce its supplies by 500,000 barrels per day in the first quarter. Other key producers Iraq and UAE will also extend their voluntary production cuts of 220,000 barrels per day and 163,000 barrels per day respectively, until the end of the second quarter.
“This new move by OPEC+ clearly shows strong unity within the group, something that was put into question after the November ministerial meeting, which saw Angola leaving OPEC,” Rystad Energy’s Senior Vice President Jorge Leon wrote in a note following the oil cartel’s decision.
The extension signals “robust determination” to defend a price floor above $80 per barrel in the second quarter, he said, adding that if OPEC+ rapidly unwound the cuts, oil prices will drop to $77 per barrel in May.
“Such a move by OPEC+ might also be seen as a sign that demand prospects in the second quarter are less optimistic than the group thought in November last year,” Leon said.
Oil prices have been languishing in a narrow $75 to $85 per barrel range since the start of the year, in spite of OPEC+ supply cuts, persistent Houthi maritime attacks in the Red Sea artery and ongoing geopolitical risks from Israel’s war against Hamas.