Oil producers cartel OPEC+ agreement at the weekend might be bearish for crude prices even though deep oil output cuts were extended well into 2025, said analysts.
OPEC+ members are cutting output by a total of 5.86 million barrels per day including 3.66 million agreed and 2.2 million bpd of voluntary cuts due to expire at the end of June 2024.
On Sunday, OPEC+ agreed to extend the agreed cuts of 3.66 million bpd until the end of 2025 and prolong the voluntary cuts by three months until end September 2024.
After that OPEC+ will gradually phase out voluntary cuts from October 2024 to September 2025.
"We are waiting for interest rates to come down and a better trajectory when it comes to economic growth ... not pockets of growth here and there," Saudi Energy Minister Prince Abdulaziz bin Salman told reporters.
OPEC+ estimated that demand for oil this year will increase by 2.2 million barrels a day
Even so, Goldman Sachs said the outcome of the meeting was bearish for the oil price with Brent at risk of falling from its current level of around US%80 a barrel.
“While a clear production plan further reduces the probability of an outright price war and supports the notion that crude oil prices will be range bound, the risks to the range itself are now skewed to the downside, ” said the bank.
According to the bank, the planned cuts are enough gh to offset a current oversupply with eight countries including Saudi Arabia, the United Arab Emirates and Iraq gradually boosting production through to the end of 2025
Goldman’s forecast for demand growth of 1.5 million barrels a day is also well under the OPEC+ estimate.
Another bank, RBC, said the meeting came with its customary plot twist as UAE was allowed to increase production by 300,000 barrels a day next year alongside the unwinding of voluntary cuts.
“While any signal to add back barrels will be seized on by market bears, we think it is important that the taper timeline execution will be data dependent and subject to review at summer’s end,” RBC said in a note.
Brent crude today was little changed at US$79.76.