Oil prices fall on supply glut fears despite OPEC+ output cut extension
Summary
- Brent and WTI both down more than 1%, post weekly loss
- Even with OPEC+ restraint, analysts see oversupply in 2025
- US drillers add oil and gas rigs for first time in 8 weeks
- US job growth rebounds in November; unemployment rate rises
NEW YORK, Dec 6 (Reuters) – Oil prices fell by more than 1% on Friday and cemented weekly losses as analysts projected a supply surplus next year on weak demand despite an OPEC+ decision to delay output hikes and extend deep production cuts to the end of 2026.
Brent crude futures settled at $71.12 a barrel, shedding 97 cents, or 1.4%. U.S. West Texas Intermediate crude futures settled at $67.20 a barrel, falling $1.10, or 1.6%.
For the week, Brent prices lost more than 2.5%, while WTI saw a drop of 1.2%.
A rising number oil and gas rigs deployed in the United States this week, pointing to rising production from the world’s biggest crude producer, also pushed prices lower.
On Thursday, the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.
Weak global oil demand and the prospect of OPEC+ ramping up production as soon as prices rise have weighed on trading, said Bob Yawger, director of energy futures at Mizuho in New York.
“They’re just waiting for better pricing and once they get that, they’re going to start jumping in again,” Yawger said.
OPEC+, which is responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially from top crude importer China – and rising output elsewhere have forced it to postpone the plan several times.
“While OPEC+’s decision to hold off strengthens fundamentals in the near term, it could be seen as an implicit admission that demand is sluggish,” analysts at HSBC Global Research said.
Bank of America forecast that increasing oil surpluses will drive the price of Brent to an average $65 a barrel in 2025, while oil demand growth will rebound to 1 million barrels per day (bpd) next year, the bank said in a note on Friday.
HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.
Brent has largely stayed in a tight range of $70-$75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.
“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.
Also pressuring prices was the U.S. rig count, which grew for the first time in eight weeks, energy services firm Baker Hughes said on Friday in its closely followed report.
Baker Hughes said oil rigs rose five to 482 this week, their highest level since mid-October, while gas rigs rose by two to 102, the highest since early November.
Despite this week’s rig increase, Baker Hughes said the total count was still down 37, or 6% below this time last year.
A mixed U.S. jobs report, which showed a strong rebound in hiring but also a slight rise in the unemployment rate, extended oil’s losses.
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