New York, USA – Oil prices took a steep 3.5% dip on Monday following OPEC+’s unexpected decision to begin unwinding some of its voluntary cuts earlier than expected. This move has raised concerns about increased demands as we head into 2025. West Texas Intermediate (CL=F) futures closed at $74.27 per barrel, while the international benchmark price, Brent (BZ=F), settled at $78.36 per barrel, marking a drop of about 13% from the peak seen in April.
Rebecca Babin, US senior energy trader at CIBC Private Wealth, highlighted that Monday’s significant sell-off was driven by technical pressures and a lack of interest in buying as demand for oil has been somewhat weak. Over the weekend, the oil alliance spearheaded by Saudi Arabia extended existing cuts of 3.6 million barrels per day until the end of next year. Additionally, they announced that additional cuts of 2.2 million barrels per day would begin to unwind over the next 12 months, starting in October.
According to Peter McNally, global head of analysts at Third Bridge, lifting cuts after September could be premature unless there is a significant increase in demand. JPMorgan analysts viewed the decision as “market neutral” for oil balances and prices in 2024, but they predict a slowdown in demand for the following year.
Natasha Kaneva, head of the global commodities strategy team at JPMorgan, emphasized the need for unwinding voluntary reductions to accommodate future demand. The downward trend in crude oil prices has also contributed to a decrease in gasoline prices in recent weeks, with the national average dropping to $3.53 per gallon on Monday.
Tom Kloza, global head of energy analysis at OPIS, noted a significant decline in wholesale gasoline prices, which may lead to lower retail numbers in the near future. The easing of gasoline prices comes amidst the broader impact of falling oil prices on the energy market.
Ines Ferre, a senior business reporter for Yahoo Finance, has been closely following these developments. Follow her on Twitter for the latest updates and analysis on this evolving situation.