prices fell up to 3.5% on Monday in response to OPEC+’s decision to start reversing some voluntary production cuts earlier than expected due to recent price weakness and demand concerns heading into 2025.
West Texas Intermediate futures dropped below $75 per barrel, while Brent (ICE) futures, the global benchmark, hovered around $78.60 in midday trading. Oil futures have declined about 13% since their April peak. According to Rebecca Babin, US senior energy trader at CIBC Private Wealth, Monday’s steep decline was “exacerbated by technical pressure and limited buying interest due to soft demand.”
Over the weekend, the OPEC+ coalition, led by Saudi Arabia, extended its existing cuts of 3.6 million barrels per day until the end of next year. However, additional cuts of 2.2 million barrels per day will begin to unwind over the next 12 months, starting in October.
Peter McNally, Global Head of Analysts at Third Bridge, noted in a note on Monday that without a significant increase in demand, lifting previous cuts after September could be too soon.
JPMorgan analysts saw the move as “market neutral” for oil balances and prices in 2024, but they predicted a slowdown in demand next year. Natasha Kaneva, head of the global commodities strategy team at JPMorgan, wrote that the group should reduce some of the voluntary cuts in 2024 when demand warrants it, even if prices are slightly lower. Otherwise, OPEC’s ample effective spare capacity—a historically high 4.1 million barrels per day during a period of record demand—could make accommodating additional large-scale supply reductions challenging by the second half of 2025.
The decline in crude prices has also led to lower gasoline prices in recent weeks. On Monday, the national average for gasoline was $3.53 per gallon, down $0.06 from a week ago, marking the largest weekly drop of 2024, according to AAA data.
Tom Kloza, global head of energy analysis at OPIS, told Yahoo Finance last week, “We’re seeing an epic slide in wholesale gasoline prices, and conversation is likely to center on falling retail numbers.”