Oil prices fell by up to 3.5% on Monday following OPEC+’s decision to start reversing some voluntary production cuts earlier than expected due to recent price softness and demand concerns heading into 2025.
West Texas Intermediate futures dropped below $75 per barrel, while Brent (ICE) futures, the international benchmark, hovered around $78.60 in midday trading. Oil futures have declined approximately 13% since their April peak. According to Rebecca Babin, US senior energy trader at CIBC Private Wealth, Monday’s steep decline was “worsened by technical pressure and limited buying interest due to soft demand.”
Over the weekend, the OPEC+ coalition, led by Saudi Arabia, extended its existing cuts of 3.6 million barrels per day until the end of next year. However, additional cuts of 2.2 million barrels per day will begin to unwind over the next 12 months, starting in October.
Peter McNally, Global Head of Analysts at Third Bridge, remarked in a note on Monday that without a significant increase in demand, lifting previous cuts after September could be premature.
JPMorgan analysts viewed the move as “market neutral” for oil balances and prices in 2024, although they forecast a demand slowdown for next year. Natasha Kaneva, head of the global commodities strategy team at JPMorgan, wrote that the group should reduce some of the voluntary cuts in 2024 when demand supports it, despite the potential for slightly lower prices. Otherwise, OPEC’s massive effective spare capacity—historically high at 4.1 million barrels per day during a period of record demand—could make accommodating further large-scale supply reductions difficult by the second half of 2025.
The decline in crude prices has also led to a reduction in gasoline prices in recent weeks. On Monday, the national average for gasoline was $3.53 per gallon, down $0.06 from a week ago, marking the largest weekly drop of 2024, according to AAA data.
Tom Kloza, global head of energy analysis at OPIS, mentioned to Yahoo Finance last week, “We’re seeing an epic slide in wholesale gasoline prices, and conversation is likely to center on falling retail numbers.”
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