Oil Prices Dip Despite OPEC+ Supply Cuts

Despite the OPEC+ alliance's announcement of extended supply cuts, oil prices have plunged below $80 per barrel. The Ice Brent contract for August closed at $77.59, slightly up by 7 cents from Tuesday's close, while the Nymex WTI front-month contract settled at $73.28, an increase of 3 cents from the previous day.

Analysts say the downturn was caused by specific trading strategies and weakening demand. They addthat traders are adjusting their short and long positions, indicating a technically oversold market. Short positions benefit from declining prices, while long positions profit from price increases over time.

On Sunday, OPEC+ extended its formal supply cuts, which were set to end this year, and added a voluntary reduction of 1.66 million barrels per day, now continuing into 2025. Furthermore, several OPEC+ members prolonged additional voluntary cuts of 2.2 million barrels per day from Q2 2024 into Q3, aiming to gradually reintroduce these volumes by September 2025.

Oil prices have fallen by nearly $5 per barrel since last Friday. While some attribute this to the OPEC+ meeting, certain analysts believe other factors, such as the options market, have contributed to the decline. Insiders expect the sector to be characterized by continued price volatility and expect that only the opening of new inventories will drive prices higher.

Despite OPEC+'s efforts to tighten the market, oil prices continue declining due to trading strategies and demand concerns, highlighting the complex dynamics in the global oil market.