OPEC+ Halts Output Amid Oversupply
West Texas Intermediate (WTI) crude oil prices remain subdued for the second consecutive day, trading around $60.70 per barrel during Tuesday’s Asian session. The decline in oil prices is largely attributed to market caution surrounding the United States Federal Reserve’s policy outlook for the December meeting.
Last week, the President of the United States Federal Reserve stated during a post-meeting press conference that a rate cut in December is “far from certain.” He emphasized that policymakers may need to adopt a wait-and-see approach until official data reporting resumes. According to the CME FedWatch Tool, traders have adjusted their expectations, with the probability of a 25 basis point rate cut in December dropping to 65%, down from 94% a week earlier.
Despite bearish pressure, crude oil prices may find support from OPEC+’s recent decision to pause output increases early next year. The Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed to a modest production increase in December but plan to halt further additions from January to March due to seasonal demand fluctuations.
A note from Bank of America, cited by Reuters, suggests that traders may interpret OPEC+’s pause as a stabilizing move. “It certainly suggests that OPEC+ recognizes the oversupply and likely does not want to push oil prices significantly lower (i.e., below $50),” the note stated.
Looking ahead, analysts remain cautious about supply risks, particularly in light of tighter United States sanctions on Russian oil majors such as Rosneft and Lukoil. These measures are expected to impact global supply dynamics, although a note from JP Morgan suggests that Russian producers will likely continue operating despite increased restrictions. “Our oil strategists maintain their view that while the risk of disruption has increased, US measures, along with complementary actions by the UK and EU, will not prevent Russian oil producers from operating,” the note said.