Brent crude futures dropped by 49 cents, or 0.63%, to $77.87 per barrel. This marked the first time Brent closed below $80 since February 7th, following a Monday decline of over 3%.
Oil prices continued their decline from yesterday, reaching their lowest point in four months. Concerns about increased supply later in the year, coupled with cautious demand forecasts from major consumers in the U.S., weighed on investor sentiment.
U.S. West Texas Intermediate crude futures dipped by 51 cents, marking a 0.51% decrease to $73.71. This came after the futures settled near a four-month low on Monday, having slid 3.6%.
The current prices are still in the region of Nigeria’s benchmark crude oil price of $78 in the 2024 budget.
OPEC+ decision over the weekend
Over the weekend, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, known as OPEC+, reached an agreement to prolong most of their oil output cuts until 2025. However, they allowed room for voluntary cuts from eight members to be gradually lifted starting from October.
The oil cartel and its allies are expected to produce 39.7 million barrels per day collectively. Saudi Arabia holds the highest daily production quota at 10.4 million barrels, followed by Russia with 9.9 million barrels per day.
The group extended Nigeria’s 1.5 million bpd quota far into 2025 despite intentions by the federal government to produce 2 million bpd in 2025. The decision means Nigeria has to plan its 2025 budget with the OPEC+ production quota in mind or go the way of Angola which exited after being assigned a smaller than expected production quota.
Additional decisions made by the JMMC include granting the authority to hold regular meetings to review market conditions for both OPEC and non-OPEC members, as well as extending the assessment period for the year 2026 until November 2025.
Decline in crude oil prices and weak demand
Over the last two months, oil prices have declined as geopolitical tensions eased and demand displayed signs of weakening. Additionally, there are indications of a softening physical market, illustrated by Brent’s prompt spread narrowing to 13 cents.
On Monday, the average gasoline price in the United States decreased by 5.8 cents per gallon, reaching $3.50 per gallon.
The U.S. government is set to release inventory and product-supplied data on Wednesday. Of particular interest is the product supplied figure, often viewed as a gauge for demand, which will reveal the extent of gasoline consumption over the Memorial Day weekend, marking the beginning of the U.S. driving season.
Analysts suggest that concerns surrounding these macroeconomic indicators from the world’s leading oil consumer are likely to persist, influencing prices in the short term.