In the realm of commodity intelligence, crude oil futures experienced marginal movement during Asian trading hours on Monday, following an announcement by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) regarding an extension of voluntary production cuts. However, alongside this decision, indications were provided about plans to commence unwinding these cuts in 2025.
As per data from the front-month Aug24 ICE Brent futures, trading stood at $81.19 per barrel at 0720 GMT, showing a slight uptick from Friday’s settlement of $81.11 per barrel. Similarly, during the same period, Jul24 NYMEX WTI was observed trading at $77.11 per barrel, as opposed to the previous settlement of $76.99 per barrel.
The OPEC+ coalition opted to uphold prices by prolonging the additional 2.2 million barrels per day (bpd) of voluntary cuts until the conclusion of the current year. Concurrently, broader group cuts were extended until 2025.
However, analysts caution that while the extension of cuts initially provided upward momentum, the announcement regarding the commencement of unwinding these reductions next year countered such optimism. It was noted that several members within the group appeared inclined towards augmenting production.
Goldman Sachs, in a client report, remarked, “The communication of a gradual unwind reflects a strong desire to bring back production of several members given high spare capacity.”
Notably, market sentiments have been subdued by weakened refining margins, compounded by sluggish distillate cracks and a lackluster gasoline market. Mike Muller, head of Asia at Vitol, conveyed concerns regarding Chinese refiners contemplating rate run cuts due to ample onshore inventories. Muller emphasized that margins, particularly gasoline cracks, are currently at multi-year lows, excluding the Covid period.
Quantum data analysis indicates a shift in the gasoline market structure to contango in Asia last week, with Atlantic gasoline poised to follow suit.
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