OPEC+ agreed to a surprise new oil supply cutback of about 9 lakh barrels a day, yet crude prices fell as traders remained skeptical on whether it will be fully implemented.
Still, traders were wary of how far countries will follow through on the curbs, which are on a "voluntary" basis. At the end of fractious talks, Angola said it would reject its diminished output quota and keep pumping at current levels.
West Texas Intermediate futures erased initial gains to slide 1.5% to $76.67 per barrel in New York.
"Crude is cratering because so far traders have yet to see concrete evidence of credible incremental output cuts alongside the continuation of voluntary Saudi and Russian cuts," said Bob McNally, president of Rapidan Energy Group. The market is "surprised and confused," he said.
Oil has weakened over the past two months amid plentiful supplies and a darkening economic backdrop. The outlook could deteriorate even further next year, when forecasters including the International Energy Agency anticipate a sharp slowdown in demand growth.
Since July, Saudi Arabia has been making an extra voluntary cut of 1 million barrels a day, described by Energy Minister Prince Abdulaziz bin Salman as a "lollipop" for the market. The kingdom was pressing the rest of the Organization of Petroleum Exporting Countries and its allies to join this effort after crude prices fell by more than 10% from their September high.
"It seems the OPEC+ production cuts are ‘voluntary’ cuts, not part of an OPEC+ agreement," said Giovanni Staunovo, an analyst at UBS Group AG. "Hence the concern is that a large fraction of it could be a pledge on paper and effectively less barrels being removed from the market."
The group ultimately downgraded Angola’s quota by roughly 200,000 barrels a day to 1.1 million a day, but Luanda’s liaison to the organization rejected the limit.
“We will produce above the quota determined by OPEC,” Angola’s OPEC governor Estevao Pedro said in an interview. “It is not a matter of disobeying OPEC; we presented our position, and OPEC should take it into consideration.”
The defiance will bring back troubling memories of Ecuador’s exit from the group. The South American producer said it would breach its quota in 2017, and eventually ended up leaving.
In a surprise move, Brazil will join the cooperation charter of the OPEC+ oil alliance, a move that won’t bind it to making production cuts. Brazilian Energy Minister Alexandre Silveira told a meeting of the group on Thursday that the country would make the move next year.
“President Lula confirmed our entry into the OPEC+ cooperation charter from January 2024,” the minister told the group, according to a video circulated by delegates. He was met with a round of applause.
