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OPEC+ Implements Additional Output Cuts to Boost Oil Prices

In a move to drive prices higher, the OPEC+ group has agreed on additional output curbs of 1 million barrels per day. This decision comes in conjunction with an extension of Saudi Arabia’s existing reduction of 1 million barrels per day.

Credit: DepositPhotos

Although not mentioned in the official press release, the cuts were confirmed by delegates at the coalition’s meeting. Each country’s quotas were announced individually.

As a result of this news, West Texas Intermediate (WTI) futures experienced a decrease of over 2%, closing at $75.96 per barrel, while Brent crude settled at $82.83 per barrel, the international benchmark price.

On another note, Brazil has confirmed its acceptance of an invitation to join OPEC+ next year, which KPMG US energy leader Angie Gildea believes will reestablish OPEC+’s dominance.

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Despite the current low prices due to weak global economic expectations, Gildea highlights the potential for an unexpected event to disrupt the market and lead to a tight supply situation, subsequently driving prices back up. The uncertainty surrounding OPEC’s decision has been a topic of speculation ever since the cartel postponed its meeting last week due to internal disagreements on output cuts for the upcoming year.

Credit: DepositPhotos

Scott Bauer, CEO of Prosper Trading Academy, previously explained that the dissension within OPEC+ arises from some members’ desire to regain market share, resulting in resistance towards ongoing cuts.

These cuts, aimed at controlling global supply and maintaining a stable floor under oil prices, were initially announced by Saudi Arabia and Russia earlier this year.

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Analysts predicted that OPEC would likely extend and possibly deepen the reductions into the next year. PVM oil broker John Evans warned that simply rolling over and implementing voluntary cuts may not be sufficient to convince the market that supply is tight enough.

Despite the efforts of OPEC+, crude prices are nearly 20% lower than the record highs seen in September, as concerns continue to mount regarding slowing demand and growing supply.

Andy Lipow, president of Lipow Oil Associates, believes that price pressure will persist in the coming months.

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