London December 2 2023: Oil prices slumped more than 2% on Friday on investor skepticism about the depth of OPEC+ supply cuts and concern about sluggish global manufacturing activity.
Brent crude futures for February settled down $1.98, or 2.45%, at $78.88 a barrel.
U.S. West Texas Intermediate crude futures (WTI) dropped $1.89, or 2.49%, to $74.07 a barrel.
For the week, Brent posted a decline of about 2.1%, while WTI lost more than 1.9%.
OPEC+ producers agreed on Thursday to remove around 2.2 million barrels per day (bpd) of oil from the global market in the first quarter of next year, with the total including a rollover of Saudi Arabia and Russia’s 1.3 million bpd of current voluntary cuts.
Traders viewed the announcement with some skepticism, OANDA analyst Craig Erlam said.
“(It) seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient,” Erlam added.
OPEC+, which pumps more than 40% of the world’s oil, is reducing output after prices fell from about $98 a barrel in late September on concerns about the impact of sluggish economic growth on fuel demand.
The cuts “will not stop a billowing cloud of confusion that is going to take the oil market weeks and months to figure out, and only if the self-reporting data is indeed reliable,” PVM analyst John Evans said.
The cuts agreed by OPEC+ on Thursday are voluntary, so there was no collective revision of OPEC+ production targets. The voluntary nature of the cuts led to some skepticism about whether or not producers would fully implement them, and also from what basis the cuts would be measured.
In the United States, Federal Reserve Chair Jerome Powell said on Friday that the central bank would move “carefully” on interest rates as risks of “under- and over-tightening are becoming balanced.”
U.S. manufacturing remained subdued and factory employment fell in November, according to a survey.
Investors are keeping a watchful eye on global manufacturing activity, which remained weak during the month on poor demand, surveys showed.
On Friday, talks to extend a week-long truce between Israel and Palestinian militant group Hamas collapsed, prompting a resumption in the war in Gaza. The conflict had initially supported oil prices on concern that any escalation that involved surrounding oil producers could disrupt supply. So far, the conflict has had no significant impact on global oil flows.
On the supply side, the United States on Friday imposed additional sanctions related to the price cap on Russian oil, targeting three entities and three oil tankers.
U.S. oil rigs rose five to 505 this week, their highest since September, energy services firm Baker Hughes (BKR.O) said in its closely followed report on Friday.
Meanwhile, U.N. Secretary General Antonio Guterres on Friday called for a future with no fossil fuel burning at all while speaking at the two-week COP28 summit in the UAE.
Money managers cut their net long U.S. crude futures and options positions in the week to Nov. 28 by 7,663 contracts to 62,070, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
