Oil futures: Crude hold at lower levels as OPEC+ cuts underwhelm

Quantum Commodity Intelligence – Crude oil futures Friday were edging higher although prices remained well below the wild week's highs after the fallout from the much-hyped OPEC+ meeting.

Front-month Feb24 ICE Brent futures were trading at $81.02/b (1750 GMT), compared to Thursday's settle of $80.86/b and the week's high of $84.61/b.

At the same time, Jan24 NYMEX WTI was trading $76.10/b versus Thursday's settle of $75.96/b.

Last Friday, Jan24 Brent closed at $80.58/b, while Jan24 WTI settled at $75.54/b.

Crude prices had raced to three-week highs prior to the OPEC+ talks on reports that the 23-member group would declare a package of around 1 million bpd of fresh cuts, but the nature to the announcement proved underwhelming.

The package of 'new cuts' was bundled in with existing reductions, and ultimately the decision disappointed with member nations left to declare their own individual cut.

"Crude oil jumped on reports that the OPEC+ alliance had agreed to a deeper 1 million cut to already lower production levels. However, prices failed to hold those gains amid a lack of clarity around the new agreement," said ANZ commodity strategist Daniel Hynes. "There was no group communique listing the individual changes to quotas."

While the declared cuts add up to close to 1 million bpd, the drip-feed nature of the declarations and potential lack of oversight ultimately meant the cuts underwhelmed.

"The market had started to price in a large probability of extra cuts, including a potential longer-lasting and official non-voluntary cut," said Goldman in a client note on Friday. The bank maintained its 2024 forecast but cautioned over further downside if the announced cuts proved disappointing.

Oil markets shrugged off upbeat data from China, with OPEC+ dominating the week's news cycle.

China's factory activity unexpectedly expanded in November, underpinned by rising orders, although sluggish external demand continues to weigh on manufacturers. The Caixin/S&P Global manufacturing purchasing managers' index (PMI) increased to 50.7 in November, up from a 49.5 reading in October.

But the manufacturing sector is struggling to recover, with the official manufacturing PMI falling for the second month.

Elsewhere, Israel said it had resumed combat against Hamas after the Gaza ceasefire ended, although traders said any 'war premium' has largely evaporated.