Oil prices declined by nearly 2% on Wednesday as the market awaited decisions from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), who are expected to extend output cuts until the end of Q1 2025.
Market Performance
Brent Crude Futures: Fell by $1.31 (1.78%), settling at $72.31 per barrel.
West Texas Intermediate (WTI): Dropped by $1.40 (2%), trading at $68.54 per barrel.
OPEC+ Developments
OPEC+ members have already implemented a series of cuts, totaling 5.86 million barrels per day (bpd)—about 5.7% of global demand—since 2022 to stabilize the market.
A planned 180,000 bpd output increase, initially scheduled for October, has been postponed due to falling prices.
The alliance’s decision to potentially maintain cuts comes amid a slowing global demand and increased production outside OPEC+, creating challenges for the group’s strategy of unwinding cuts by 2025.
US Crude Inventories
The US Energy Information Administration (EIA) reported a 5.1 million barrel drawdown in crude oil inventories for the week ending November 29, indicating stronger demand.
This contrasted with a 1.23 million barrel build estimated earlier by the American Petroleum Institute.
Fuel inventories, however, saw increases:
Gasoline: A 2.4 million barrel build (compared to a prior 3.3 million barrel increase).
Geopolitical and Demand Factors
Geopolitical Tensions:
Escalating unrest in Syria and potential Israel-Hezbollah conflict heightened market volatility.
Political turmoil in South Korea, with lawmakers submitting an impeachment bill against President Yoon Suk Yeol, added to global instability.
Demand Dynamics:
Stronger-than-expected factory activity in China initially buoyed hopes for demand recovery but failed to offset broader pressures.
Outlook
The upcoming OPEC+ meeting on Thursday is expected to clarify production strategies, with a focus on balancing market stabilization against a backdrop of geopolitical tensions and economic uncertainty. While short-term inventory drawdowns in the US offer some optimism, global challenges may continue to weigh on oil prices.
