Oil nudges higher after OPEC+ extends output cuts (updated)
04/03/2024 04:48
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OPEC+ extend 2.2 mln bpd voluntary oil output cuts to end
Q2
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Russia to cut oil output and exports by another 417,000
bpd
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Brent spreads widen after OPEC+ announcement
(Adds comments, Brent intermonth spreads, updates prices)
By Florence Tan
March 4 (Reuters) - Oil prices nudged higher on Monday
after OPEC+ members agreed to extend voluntary oil output cuts
to the end of the second quarter, largely in line with market
expectations, while Russia pledged to cut production and
exports.
Brent LCOc1 futures was 14 cents, or 0.2% higher, at
$83.69 a barrel at 0415 GMT, while the U.S. West Texas
Intermediate (WTI) CLc1 inched up 2 cents to $79.99 a barrel.
Prompt Brent intermonth spread LCOc1-LCOc2 widened 5 cents
to 90 cents a barrel while the six-month spread LCOc1-LCOc7
gained 15 cents to $4.49 in backwardation, a sign that traders
are expecting supply to tighten ahead. Backwardation refers to a
market structure where prompt prices are higher than those in
future months.
"Signs of tightness in the physical market continue to push
crude oil higher. Output cuts by the OPEC+ alliance continue to
reduce supply as the market worries about the renewed tensions
in the Middle East," ANZ analysts said in a note on Monday.
The Organization of the Petroleum Exporting Countries and
its allies (OPEC+) is extending their voluntary oil output cuts
of 2.2 million barrels per day into the second quarter and this
is expected to cushion the market amid global economic concerns
and rising output outside the group, with Russia's announcement
surprising some analysts.
Russia will cut its oil output and exports by an additional
471,000 bpd in the second quarter, in coordination with some
OPEC+ participating countries, its Deputy Prime Minister
Alexander Novak said on Sunday.
The OPEC+ cuts would lead to a lower production from the
group at 34.6 million bpd in the second quarter against an
earlier forecast that output could rise above 36 million bpd in
May as producers unwind supply cuts, Jorge Leon, a senior vice
president at consultancy Rystad Energy said in a note.
"This new move by OPEC+ clearly shows strong unity within
the group, something that was put into question after the
November ministerial meeting, which saw Angola leaving OPEC," he
said.
"It also shows robust determination to defend a price floor
above $80 per barrel in the second quarter."
Rising geopolitical tensions due to the Israel-Hamas
conflict and Houthi attacks on Red Sea shipping have supported
oil prices in 2024, although concern about economic growth has
weighed.
Yemen's Iran-backed Houthis vowed on Sunday to continue
targeting British ships in the Gulf of Aden following the
sinking of UK-owned vessel Rubymar.
In some of the strongest comments by a senior U.S. leader,
U.S. Vice President Kamala Harris on Sunday demanded Palestinian
militant group Hamas agree to an immediate six-week ceasefire
while forcefully urging Israel to do more to boost aid
deliveries into Gaza.
Washington has insisted the ceasefire deal is close and has
been pushing to put in place a truce by the start of Ramadan, a
week away. A U.S. official on Saturday said Israel has agreed on
a framework deal.
(Reporting by Florence Tan and Sudarshan Varadhan in Singapore;
Editing by Stephen Coates and Lincoln Feast.)
((sudarshan.Varadhan@thomsonreuters.com;
Florence.Tan@thomsonreuters.com;))