OPEC Plans to Extend Production Cuts but Crude Oil Prices End Lower

In the last two weeks, the crude Oil market indicated decent buying momentum, with US WTI crude  Oil prices increasing from above $70 to $80 almost. This was the highest level seen in Oil since the middle of November. However, this week crude Oil was trading relatively flat, and on Friday it experienced a decline, influenced by ongoing Middle Eastern peace talks in Paris. As a result, Oil prices retreated to $76.61 by the end of the week.

WTI Crude Oil Chart – Buyers Failed at the 50 SMA

On Wednesday the EIA weekly report on US Oil inventories showed another decent buildup, but Oil products experienced tightness. While a stronger global economy serves as a tailwind, and US refineries are expected to increase production in the coming weeks, OPEC and the Middle Eastern crisis remain the primary drivers of Oil prices. However, there are indications that producer discipline within OPEC may not be as strong as necessary for stabilizing prices, which is keeping the market doubtful of how much OPEC can do to increase Oil prices.

OPEC Plans to Extend Production Cuts to Q2

A recent Bloomberg survey indicates a strong consensus among observers and analysts in the oil industry regarding OPEC+’s future production plans. The vast majority of analysts surveyed projected that OPEC+ would maintain its oil production cutbacks into the second quarter of 2024.

This alignment in expectations suggests a widespread belief that OPEC+ will continue its efforts to manage Oil supply and try to affect Oil prices beyond the first quarter. But, as I mentioned above, there is no conviction in the markets that OPEC headed by Saudi Arabia will be able to keep the pressure to the upside for too long.  However, the improvement in the global economy as we have seen so far this year, which will be aided by central banks lowering interest rates will help increase Oil demand as the year progresses.

Crude Oil Live Chart