Oil prices decline and are expected to lose money each week even after OPEC+ extends its output cuts

Despite an OPEC+ resolution to postpone output hikes and extend significant production cuts until the end of 2026, analysts predicted a supply surplus next year, which caused oil prices to drop 1% on Friday and headed for a weekly loss.

At 11:04 a.m. EST, Brent crude futures were down 85 cents, or 1%, to $71.24 a barrel. At $67.38 a barrel, U.S. West Texas Intermediate crude futures fell 92 cents, or 1%.

WTI was expected to decline by almost 1% for the week, while Brent was expected to drop by over 2%.

The Organization of the Petroleum Exporting Countries and its allies in OPEC+ extended the full unwinding of cuts by one year till the end of 2026 on Thursday, delaying the start of oil output increases by three months until April.

According to Bob Yawger, director of energy futures at Mizuho in New York, prices have been affected by weak global demand for oil and the possibility that OPEC+ could increase output as soon as prices rise.

“They’re just waiting for better pricing and once they get that, they’re going to start jumping in again,” Yawger stated.
A downturn in global demand, particularly from top crude importer China, and rising supply elsewhere have forced OPEC+, which accounts for almost half of the world’s oil production, to repeatedly postpone its plan to begin unwinding cutbacks in October 2024.

Analysts at HSBC Global Research stated that although OPEC+’s choice to wait boosts fundamentals in the short term, it may be interpreted as an implied acknowledgment that demand is weak.

In a report released on Friday, Bank of America predicted that rising oil surpluses would push Brent to an average of $65 per barrel in 2025, although the bank also anticipated that oil consumption would increase to 1 million barrels per day (bpd) the following year.

In the meantime, HSBC stated in a note that it now anticipates a lower oil market surplus of 0.2 million barrels per day, down from 0.5 million barrels per day earlier.

Over the past month, Brent has mostly remained within a narrow band of $70-75 per barrel as investors considered the Middle East’s increased geopolitical risk and China’s poor demand signals.

Generally speaking, the market is said to be trapped inside its relatively small range. According to PVM analyst Tamas Varga, “the medium-term view remains rather pessimistic, even though immediate developments might push it out of this range on the upside briefly.”

The United States’ mixed employment report, which revealed a minor increase in the number of unemployed people but also an increase in hiring, also put pressure on pricing.