Oil prices fall despite extension of OPEC+ production cut

SINGAPORE (Reuters) – Oil prices fell on Monday morning despite producer group OPEC+’s decision to extend deep production cuts until 2025.

Brent futures for August delivery fell 24 cents, or 0.3%, to $80.87 a barrel by 0030 GMT.

West Texas Intermediate (WTI) crude oil futures for July delivery fell 19 cents, or 0.25%, to $76.80.

The Organization of the Petroleum Exporting Countries and allies led by Russia, known together as OPEC+, are currently reducing production by a total of 5.86 million barrels per day (bpd), which represents about 5.7% of global demand.

This includes 3.66 million bpd of cuts that were set to expire at the end of 2024, and voluntary cuts of 2.2 million bpd from eight members that were to expire at the end of June 2024.

But on Sunday, the group agreed to extend the 3.66 million bpd cuts for one year, until the end of 2025. It will also extend the 2.2 million bpd cuts for three months, until the end of September 2024. , before gradually eliminating them over the course of a year. from October 2024 to September 2025.

Goldman Sachs analysts said in a note that the meeting was considered pessimistic, despite the extension of production cuts, as eight OPEC+ countries had already signaled plans to gradually eliminate the 2.2 million bpd of voluntary cuts during the period. October 2024 to September 2025.

“Communicating a surprisingly detailed plan to reverse extra cuts makes it harder to keep production low if the market turns out to be weaker than OPEC’s optimistic expectations,” the analysts said.

“The communication of a gradual reduction reflects a strong desire to bring back production in several members, given high spare capacity.”

In the Middle East, mediators in the Gaza conflict have urged Israel and Hamas to finalize a ceasefire and hostage release agreement outlined by U.S. President Joe Biden, although Israel has said there will be no formal end to the war until Hamas maintains power. Israel said it was evaluating an alternative government to the Iran-backed group.

An aide to Prime Minister Benjamin Netanyahu said Israel had accepted a framework agreement to end the war in Gaza, although the aide said it was flawed and needed much more work.

(Reporting by Emily Chow; Editing by Jamie Freed)