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Oil futures struggled to build on last week’s gains on Monday, finding little lasting support from a widely expected decision by the Organization of the Petroleum Exporting Countries and its allies to extend voluntary production cuts through the second quarter.
U.S. oil prices reached highs above $80 a barrel then eased back, while global crude prices struggled to hold gains following Sunday’s OPEC+ announcement, which had been widely expected and also raises concerns about the outlook for oil demand, analysts said.
Price moves
-
West Texas Intermediate crude for April delivery
CL00,
-1.45% CLJ24,
-1.45%
fell 49 cents, or 0.6%, to $79.48 a barrel on the New York Mercantile Exchange after ending last week with a 4.6% gain. -
May Brent crude
BRN00,
+0.07% BRNK24,
+0.07% ,
the global benchmark, was down 15 cents, or 0.2%, at $83.40 a barrel on ICE Futures Europe. -
April gasoline
RBJ24,
-1.06%
edged down by 0.3% to $2.6055 a gallon, while April heating oil
HOJ24,
-2.29%
lost 1.4% to $2.6661 a gallon. -
Natural gas for April delivery
NGJ24,
+5.18%
traded at $1.958 per million British thermal units, up 6.7%. Prices gained 8% last week after posting a February loss of over 11%.
Market drivers
U.S. oil prices “saw a limited enthusiasm” above $80 a barrel after the OPEC+ announcement, “a sign that OPEC cuts alone won’t keep the price of crude above the $80” level, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Oil futures initially rose after OPEC+ extended the output cuts, which amounted to 2.2 million barrels a day. Offering some surprise, Russia agreed to voluntarily cut production and exports by an additional 471,000 barrels per day in the second quarter.
OPEC+ said Russia’s voluntary cut is in addition to the voluntary reduction of 500,000 barrels a day it previously announced in April 2023, which extends to the end of December 2024.
The overall reductions “show strong unity within the group, something that was put into question after the November ministerial meeting, which saw Angola leaving OPEC,” Jorge Leon, senior vice president at Rystad Energy, said in a note.
“It also shows robust determination to defend a price floor above $80 per barrel in the second quarter. Our market assessment showed that, if OPEC+ rapidly unwound the voluntary cuts, downside price pressure would have accentuated, taking prices down to $77 per barrel in May,” he said.
At the same time, the decision “might also be seen as a sign that demand prospects in the second quarter are less optimistic than the group thought in November last year,” he said, while noting that OPEC’s estimates of demand for the second quarter have actually increased.
Traders are also watching cease-fire talks between Hamas and Israel.
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