Quiver Quantitative - Oil prices dipped over $1 a barrel, reacting to Angola's unexpected decision to exit the Organization of the Petroleum Exporting Countries (OPEC). Brent crude futures saw a 1.63% decrease to $78.40 a barrel, while U.S. West Texas Intermediate crude experienced a 1.60% drop to $73.03. Angola's departure from OPEC, announced by its oil minister Diamantino Azevedo, came after the country expressed dissatisfaction with its production quota for 2024. Angola's current oil production hovers around 1.1 million barrels per day (bpd).
UBS analyst Giovanni Staunovo noted that Angola's exit would minimally impact oil market supply due to its declining production. However, concerns about the unity of OPEC+—the alliance that includes major oil producers like Russia—fueled the price drop. Before Angola's announcement, oil prices had been relatively stable, with Brent near $80 a barrel. The market was weighing factors like increased U.S. inventories and record output against potential global trade disruptions, particularly those affecting the Red Sea due to Houthi attacks on shipping.
Market Overview: -Oil prices plummet over $1 after Angola stuns markets with its decision to leave OPEC. -Production decline concerns outweigh minimal immediate impact, raising questions about OPEC+ unity. -US inventories build, and record output overshadow trade disruption jitters in the Red Sea.
Key Points: -Angola's exit from OPEC, fueled by dissatisfaction with quota cuts, shakes the producer cartel's cohesion. -Market worries about potential further defections outweigh small supply implications of Angola's exit. -Higher US inventories and record production add downward pressure, despite concerns over longer transport routes due to Red Sea attacks.
Looking Ahead: -OPEC+ unity and potential further departures from the group will be closely watched in the coming months. -US production and inventory trends, along with Red Sea security developments, will remain crucial oil price catalysts. -Investor sentiment towards riskier assets and broader economic outlook will also influence energy market direction.
The U.S. Energy Information Administration (EIA) reported that U.S. crude inventories rose by 2.9 million barrels in the week to December 15, reaching 443.7 million barrels, contrary to expectations of a 2.3 million barrel decrease. Additionally, U.S. crude output set a new record at 13.3 million bpd, surpassing the previous high of 13.2 million bpd. The market's reaction also reflected concerns over longer and costlier shipping routes as major carriers avoided the Red Sea, increasing transportation and insurance expenses.
Both Brent and West Texas Intermediate had seen gains in the previous three sessions, driven by worries about trade disruptions. The shift in maritime routes away from the Red Sea is a response to increased risks in the region, impacting global shipping and oil markets alike.
This article was originally published on Quiver Quantitative