Oil prices extended their losing streak to five sessions on Wednesday as traders doubted whether OPEC+ would honor their pledged production reductions.
The US West Texas Intermediate (WTI) crude oil January futures closed 4.07% lower at $69.38 per barrel, its lowest price since June. However, industry watchers anticipate a slight 0.66% rebound to $69.84 in the coming market session.
Brent oil futures for February delivery also shed 3.76% to $74.30 a barrel. The two benchmarks recovered after talks between Saudi and Russia supporting petroleum prices.
The US posted a record-high average daily production of 13.24 million barrels in August and September. Growing domestic demand during winter has helped prevent petrol inventories from accumulating.
Data from the Energy Information Administration (EIA) showed that crude oil stock shed 4.63 million barrels in the week ending November 24. The reading exceeded the forecast for a draw of 1.35 million barrels and erased the 1.61 million barrels gained the week before.
Meanwhile, the American Petroleum Institute (API) reported that US oil inventories added 0.59 million barrels in the week ending December 01. The data was the opposite of the market consensus’ 2.27 million barrel deficit.
Gasoline inventories in the country also grew by 5.42 million barrels, far above the projected increase of 1.03 million barrels. The reading emphasized declining gasoline demand in the US, partly due to the growing popularity of electric vehicles (EVs).
OPEC+ Voluntary Output Cuts Spark Uncertainty
Following the OPEC+’s November 30 meeting, the group said it will deepen yield tightening by about 2.20 million barrels per day (bpd) in 2024.
Saudi Arabia and Russia have also decided to continue with their current 1.30 million bpd of oil output narrowing.
The OPEC+ leader has stated that the additional cuts were voluntary and to be announced independently by each member. Their non-compulsory nature had analysts uncertain of the quota being met.
Insiders claimed that disagreement among delegates caused the meeting to be postponed from its original date of November 26. The group’s African members were reportedly against reducing more, refusing to further shrink their profits and oil market share.
Economists anticipate the decline in crude prices to continue unless OPEC+ guarantees the additional cuts.