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Oil Prices Slide as OPEC+ Postpones Meeting Amidst Weakening Demand
Oil prices experienced a downward trend on Thursday, influenced by a combination of diminishing demand and uncertainties surrounding the supply outlook. The international benchmark, Brent crude, witnessed a 0.75% decline, reaching $81.34 per barrel in mid-morning trading, following a notable 4% drop the previous day. Concurrently, the U.S. benchmark, West Texas Intermediate (WTI), also saw a 0.6% decrease, settling at $76.63 per barrel.
This downturn was triggered by an unexpected surge of 8.7 million barrels in U.S. crude stockpiles last week, amplifying concerns about demand in the world's largest oil consumer.
Adding to the market's uncertainty, the OPEC+ meeting scheduled for Sunday faced a last-minute delay, now set for Nov. 30. This postponement has cast a shadow over hopes that the major oil-producing nations would reach an agreement to extend output curbs into 2024, aiming to stabilize prices.
Jorge Leon, Senior Vice President at Rystad Energy, noted, "This postponement indicates difficulties within the OPEC+ group to reach an agreement to cut production." Without additional production cuts, Rystad's analysis predicts that oil prices will likely linger around $80 per barrel in the coming year.
Leon explained that some OPEC+ members may be hesitant to reduce their production quotas in the upcoming year, and the four-day delay suggests challenges in reaching a consensus on production cuts.
In addition to these factors, traders are closely monitoring developments in the Middle East. The agreement on a temporary humanitarian ceasefire between Israel and Palestinian militants on Thursday has temporarily eased tensions. However, potential further escalations could pose a threat to regional oil shipping routes.
Jorge Leon cautioned, "We cannot completely rule out the possibility of a deadlock at this point" regarding the upcoming OPEC+ talks. The intricate interplay of supply and demand dynamics, coupled with geopolitical tensions, sets the stage for a pivotal period in the oil market.