Oil prices saw an increase on Monday following an agreement among the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to extend voluntary oil output cuts until the end of the second quarter. This move, coupled with Russia’s commitment to reduce production and exports, had provided a boost to market sentiment.
By 7:55 GMT, Brent crude futures saw a 0.26 percent increase to $83.77. Meanwhile, West Texas Intermediate crude futures increased by 0.15 percent, to $80.09 a barrel.
Output cuts
OPEC+ extended voluntary oil output cuts of 2.2 million barrels per day into the second quarter of the year. This move aims to stabilize oil prices amid global economic concerns and rising output outside the group.
In addition, Russia also announced that it will cut its oil output and exports by an additional 471,000 barrels per day in the second quarter. The OPEC+ oil output cuts decrease oil production to 34.6 million barrels per day in the second quarter. Earlier forecasts expected that output could rise above 36 million barrels per day in May as producers ease supply cuts.
This move reflects the group’s commitment to stabilizing oil prices. Moreover, it shows their determination to keep prices above the $80 per barrel level in the second quarter.
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Geopolitical tensions
Rising geopolitical tensions in the Red Sea have continued to support oil prices in 2024. Concerns about supply disruptions in the region have contributed to market uncertainty, further bolstering the case for sustained output cuts by OPEC+. However, concerns over economic growth have impacted the market. Despite oil production cuts, concerns over economic growth trigger a weaker global demand for oil, thus weighing on its prices.
As the market reacts to OPEC+’s decision to extend its output cuts, oil prices continue to fluctuate. This decision is expected to provide support from prices in the long term, maintaining them above the $80 per barrel mark. However, geopolitical uncertainties continue to pose challenges, keeping market participants vigilant amidst shifting dynamics.
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