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WTI Sheds Over 1.6% As Demand Trumps Everything Else

Oil prices shed over 1% on Monday despite rising tensions in the Red Sea and on the front lines of the Israel-Hamas conflict, with OPEC+ extending voluntary production cuts and demand sentiment taking a beating from an unusually mild winter. 

At 2:28 p.m. ET on Monday, Brent crude was trading up 1.05% at $82.67, while West Texas Intermediate (WTI) was trading up 1.66% at $78.64. 

On Sunday, OPEC+ agreed to extend its 2.2-million-barrel/day voluntary production cuts for another quarter, with this outcome already having been priced in ahead of time. 

Russia also said it would deepen cuts by over 470,000 bpd in the second quarter of this year, while also easing curbs on exports. Russia already has a 500,000-bpd cut quote for production and exports.  While this was a surprise move, it failed to move the oil price needle on Monday. 

"With OPEC loadings appearing steady and aggregate OPEC supply potentially showing little effect from incremental voluntary cuts implemented in Q1, we do not view the extensions from the broader group as particularly impactful," Macquarie energy strategist Walt Chancellor told Reuters on Monday. 

Some analysts saw this morning’s brief increase in oil prices as a response to the Israel-Hamas conflict and the current stalemated ceasefire negotiations. 

“The OPEC+ rollover was baked in, it’s the Gaza crisis that prices are responding to,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “As long as the cease-fire negotiations remain in a stalemate, crude is likely to either hover around current levels or come under further upward pressure.”

Rystad Energy’s Jorge Leon told Reuters that OPEC+ cuts would result in 34.6 million bpd in output for Q2, down 1.4 million bpd from earlier forecasts.

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By Charles Kennedy for Oilprice.com

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  • George Doolittle on March 04 2024 said:
    Negative pricing of natural gas futures very much in play currently as the "Year without a Winter" now very much enters March, 2024 so this Winter basically be over for US East Coast. If a battery electric truck be travelling from South to North along I-95 with a favorable wind and the range even under load could double from EPA estimates. Is lane keeping assist standard on a Class 8 semi in the USA yet? Seems crazy for that not to be true. Either way any product moving West to East to do so right now is also absolutely dirt cheap as well. Not really bullish on fuel demand as a consequence right now would be an understatement and there be no shortage of supply for that going on all Year soooo...

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