OPEC+ extends production cuts until 2025, raising concerns about oversupply and hurting oil prices. Economic and geopolitical data also influence.
The recent OPEC+ decision on oil production has generated widespread discontent. The group, led by Russia, has decided to extend most of the production cuts until the end of 2025. However, a subgroup of eight large producers will gradually eliminate voluntary restrictions of 2.2 million barrels per day until September 2025. This situation has generated concern in the market due to excess supply, which has taken Brent oil to February lows, with the possibility of reaching $74.80 per barrel.
Samer Hasn, an analyst at xs.com, explains that the declines reflect concerns about oversupply, exacerbated by OPEC+’s decision to reduce production later this year. This concern adds to concerns about the US economy, which has seen a larger-than-expected contraction in manufacturing activity due to a lack of business investment.
Market traders are keeping an eye on US employment data due to be released on Friday. James Harte, strategist at TickMill Group, warns that a weak reading could increase pessimism and send crude oil prices even lower in the short term. However, weak macroeconomic data could also increase expectations of rate cuts by the Federal Reserve, which would revive the economy and oil demand.
In Europe, although rate cuts are expected from the European Central Bank, inflation and high interest rates continue to affect demand and growth. The economic recovery in China, which depends on its European trading partners, will also be key for crude oil demand.
On the geopolitical front, tensions in the Middle East have decreased, but the possibility of a ceasefire in Gaza remains remote. The president of the United States, Joe Biden, has presented a proposal unlikely to be accepted by the parties involved, maintaining uncertainty in the region.
