By Erwin Seba
HOUSTON (Reuters) -Oil prices fell on Monday on concerns about a drop in demand and continued uncertainty about the depth and duration of OPEC+ supply cuts.
futures fell 85 cents, or 1.08%, to $78.03 a barrel. U.S. West Texas Intermediate crude futures ended down $1.03, or 1.39%, at $73.04.
Monday’s decline adds to a 2% decline last week, following supply cuts announced Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+.
“The market has decided that OPEC+’s production plans won’t have that much impact. It’s more style than substance,” Andrew Lipow, chairman of Lipow Oil Associates, said of crude traders on Monday.
Saudi Energy Minister Prince Abdulaziz bin Salman said in a television interview with Bloomberg on Monday that he expected OPEC and its allies to implement the 2.2 million euros in production cuts announced last week.
“I honestly believe that the delivery of the 2.2 will happen,” Bin Salman said. “I honestly believe this will continue to happen (and that the) 2 million will even overcome the massive inventory build-up that usually happens in the first phase.”
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OPEC+ announced production cuts last week that are voluntary in nature, raising questions about whether or not producers would fully implement them. Investors were also unsure about how the cuts would be measured.
Traders have been waiting for the past five months to see if the production cuts and predicted changes in demand would materialize, said Zane Curry, vice president of markets and research at Mobius Risk Group.
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“We have become Missouri, the Show-Me State,” Curry said.
Surveys on Friday showed global manufacturing activity remained weak in November due to weak demand, with euro zone factory activity falling, while there were mixed signals about the strength of the Chinese economy.
“Last week’s OPEC+ ‘deal’ was unconvincing to say the least,” said Craig Erlam, analyst at brokerage OANDA. “And with markets seemingly expecting a bigger economic slowdown next year, the announcement simply doesn’t go far enough.”
Elsewhere, Western countries have stepped up efforts to enforce the $60 per barrel price ceiling on maritime shipments of Russian oil, imposed to punish Moscow for its war in Ukraine.
Washington imposed additional sanctions on three entities and three oil tankers on Friday.
