Oil Prices Slump After OPEC+ Extension Disappoints Investors

Crude oil futures slumped to kick off the first full trading week of March despite global energy markets potentially facing tighter supply conditions in the coming months. Oil prices have been on a tear this year, rising double digits. Can oil sustain the upward trend?

April West Texas Intermediate (WTI) crude oil futures tumbled $1.27, or 1.59%, to $78.68 per barrel at 17:26 GMT on Monday on the New York Mercantile Exchange. US crude is coming off a monthly gain of about 8%. Year-to-date, the WTI contract has rallied 10.3%.

Brent, the international benchmark for oil prices, slipped below $83. May Brent crude futures shed $0.90, or 1.08%, to $82.65 a barrel on London’s ICE Futures exchange. Brent prices have risen more than 7% so far this year.

On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, announced on Sunday that they would extend their voluntary production cuts through the second quarter, totaling about 2.2 million barrels per day (bpd).

Saudi Arabia, the de factor OPEC+ leader, confirmed that it would keep its voluntary decrease of one million barrels per day intact until the end of the second quarter.

Market observers had widely anticipated this move. However, investors had likely wanted the cartel to expand the output reductions through the end of the year.

Meanwhile, industry analysts see the latest decision as a signal that the group is united after some concerns about a fractured entity late last year.

“This new move by OPEC+ clearly shows strong unity within the group, something that was put into question after the November ministerial meeting, which saw Angola leaving OPEC,” said Rystad Energy’s Senior Vice President Jorge Leon in a note.

For now, investors will keep a close eye on the situation in the Middle East and the Energy Information Administration’s (EIA) storage data.

In other energy commodities, April natural gas futures surged $0.12, or 6.54%, to $1.955 per million British thermal units (Btu). April gasoline futures slid $0.0321, or 1.23%, to $2.5823 a gallon. April heating oil futures dropped $0.0588, or 2.17%, to $2.6454 per gallon.

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