(WCTW) OPEC+ Decides To Start Unwinding Voluntary Production Cut And What It Means

As of this writing, WTI and Brent are selling off ~2.3% with WTI testing the $74 to $75 support region. The sell-off is the result of OPEC+'s latest production cut announcement.

Over the weekend, OPEC+ agreed to extend the baseline production cut of ~2.2 million b/d until Q3 2023. But while the headline appears bullish, the devil is always in the details.

Since the announcement was made in 2023, the market has been paying attention to the voluntary production cuts announced by the countries above. Most importantly, the Saudis, which have spearheaded the voluntary production cut efforts, are really the only ones reducing oil supplies to the world.

But with the announcement that the voluntary cut will only be extended to the end of Q3 and gradually lifted following that, the market will find this news bearish.

Why?

Since the peak physical oil market conditions we saw in early April, oil prices have meaningfully corrected and physical oil market signals have weakened. As a result, the timing of this production cut lift is coming at a bad time.