On Thursday OPEC announced that it would extend its output cuts into the new year in attempt to stabilize declining crude oil prices. Additionally to this strategic move the cartel announced it will integrating Brazil, who is an emerging oil supplier, into the alliance.

However, OPEC+ nations are heavily dependent on oil revenue, have been encountering difficulties to boost prices lately. On Thursday OPEC+ has declared voluntary cuts surpassing 2 million barrels per day (bpd) for the first quarter of 2024. Also, Brazil has been invited to join the alliance in January, which is aligning with OPEC+ endeavours to stabilize global supply.

Despite efforts through output reductions by OPEC+ and individual member nations since October 2022, enduring impacts on oil prices did not materialise. Apprehensions persist regarding an oversupply of crude in a weakening global economy.

OPEC meeting could be characterised as disappointing for OPEC itself, as the alliance couldn’t commit to its desired production cuts. In an effort to tackle the sluggish market, Saudi Arabia, extended its voluntary cuts of 1 million bpd through March 2024, followed by Russia with 500,000 bpd cuts a day, accompanied by other members of the cartel with varying reductions. However, both international benchmarks – Brent crude and WTI declined post-meeting.

Source: TradingView

The market was sceptical after the meeting, driven by concerns about compliance given the voluntary nature of the reductions, ongoing macroeconomic headwinds, and investors’ expectations of deeper cuts.

While OPEC+ endeavours to influence prices by cutting supply, the risk looms that increased production from non-OPEC countries could diminish the alliance influence. The extended cuts are likely to keep WTI crude prices within its current trading range between $72 and $80 per barrel in the months ahead. Unless minor resistance of $80 is broken upwards, higher price levels remain elusive.