Oil prices fell to their lowest level in nearly five months on Tuesday due to a strengthening U.S. dollar and demand concerns, leading the market to decline for the fourth consecutive day amid doubts about the voluntary supply cuts announced by OPEC+ last week.
Experts’ analyses indicate the unlikely impact of OPEC+ cuts
Analysts say that OPEC+ cuts are unlikely to be significant, with Russian Novak stating that OPEC+ could deepen oil supply cuts, and API data showing that crude oil and fuel inventories in the United States rose last week.
Prices drop despite Russian Novak’s statements
Oil prices have fallen despite statements by Russian Deputy Prime Minister Alexander Novak that OPEC+ is prepared to deepen oil production cuts in the first quarter of 2024 to eliminate “speculation and volatility” if current production reduction measures are insufficient.
Impact of OPEC+ cuts on the markets
OPEC+ agreed on November 30 to voluntary production cuts of about 2.2 million barrels per day for the first quarter of 2024. However, at least 1.3 million barrels per day of these cuts were extensions of existing voluntary restrictions in Saudi Arabia and Russia.
Impact of falling oil prices on producing countries
The Kremlin said that OPEC+ production cuts would take time to begin to work. Russian President Vladimir Putin will visit OPEC+ countries the United Arab Emirates and Saudi Arabia on Wednesday and will host Iranian President Ebrahim Raisi in Moscow on Thursday.
Impact of rising dollar and demand concerns on oil prices
The U.S. dollar rose to its highest level in two weeks against a basket of currencies after new employment data showed a decrease in job openings in October to the lowest level since early 2021. The slow labor market and easing inflation have raised optimism that the Federal Reserve has finished raising interest rates in this cycle, with financial markets expecting rate cuts by mid-2024.
A strong dollar can reduce oil demand by making fuel more expensive for buyers using other currencies. On the other hand, lower interest rates may increase oil demand by making it cheaper for consumers to acquire more goods and services.
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