Oil prices decline due to supply cuts by OPEC+ ahead of Thanksgiving

Oil prices fractionally declined on Wednesday before the Thanksgiving holiday trading in the U.S., while the market is waiting for news on output cuts from the Organisation of the Petroleum Exporting Countries (OPEC) producers group.

Brent crude futures slipped 52 cents to $81.93 a barrel by 0946 GMT, while U.S. West Texas Intermediate crude futures were down 49 cents to $77.28.

Both benchmarks have decreased for four straight weeks, and prices weakened further last week on growing worries about the demand outlook.

On the other hand, Sunday’s OPEC meeting when the producer group may discuss deepening supply cuts due to slowing global economic growth is keeping investors cautious.

On Monday, both contracts climbed about two percent after three OPEC sources told Reuters the group, OPEC and allied producers, was set to consider more oil supply cuts when it meets on Nov. 26.

The upcoming meeting has been the key central focus for oil prices for now, with sentiments shrugging off the sharp build in U.S. crude inventories,” said Jun Rong Yeap, a market strategist at IG group.

Analysts have predicted that OPEC is likely to prolong or even deepen oil supply cuts into next year.

Even if the OPEC nations extend their cuts into next year, the global oil market will see a slight supply overflow in 2024, the head of the International Energy Agency’s (IEA) oil markets and industry division stated on Tuesday.

OPEC and its allies would need to not only prolong but also intensify their cuts to support prices, John Evans of oil broker PVM stated in a note on Wednesday.

“A rollover of cuts and voluntary cuts will send the market south, for the current level of supply clamp is not enough to persuade the market that it is ‘tight’,” he added. “Oil is in for some tense and headline-reactive days.”

U.S. crude stocks rose by nearly 9.1 million barrels in the week ending on Nov. 17, according to market sources citing American Petroleum Institute figures on Tuesday.

Gasoline inventories fell by about 1.79 million barrels, while distillate inventories declined by about 3.5 million barrels.

U.S. government data on stockpiles is due on Wednesday.

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