Oil firms after OPEC+ extends production cuts

Oil prices were little changed on Monday after the OPEC+ alliance on Sunday extended voluntary production cuts until the end of the second quarter of the year, as was widely expected.

According to Reuters, Brent crude futures fell 14 cents to $83.41 per barrel, after rising 2.4% last week. US West Texas Intermediate crude futures fell 23 cents to $79.74 a barrel after increasing 4.6% last week.

The member states of the OPEC+ alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to extend the voluntary production cuts of 2.2 million barrels per day into the second quarter of the year, and this is expected to protect the market amid global economic concerns and increased production from outside the group. While Russia’s announcement of an additional cut in exports and production surprised some analysts.

Russian Deputy Prime Minister Alexander Novak said on Sunday that Russia will reduce oil production and exports by an additional 471,000 barrels per day in the second quarter of the year in coordination with some countries in OPEC+.

Victor Katona, chief crude oil analyst at Kpler, pointed out that the market reaction does not necessarily reflect the seriousness of the OPEC+ announcement.

The additional Russian cut is closely linked to a 400,000 barrels per day decline in the country’s refinery operating rate, which is largely due to Ukrainian drone strikes on refining assets across Russia.

Katona believes, “Moscow’s decision to reduce production contradicts its previous pledges when it actually reduced exports and kept oil at home for refining purposes.”