Oil prices fall as market awaits official declaration on OPEC cuts

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Oil prices have edged down as investors are awaiting ratification of supply cut agreement from OPEC, which agreed to increase cuts in early 2020 but could not promise next steps after March.

Brent futures declined $0.21 at $63.18 a barrel, while West Texas Intermediate (WTI) oil futures dipped $0.14 to $58.29 a barrel, reported Reuters.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, agreed to more output cuts to prevent supply glut in early 2020. The agreement will be formally implemented later today.

It is expected to cut an extra 500,000 barrels per day (bpd) of production under tighter compliance and other adjustments. The producer group has been withholding 1.2 million barrels per day (Mbpd) and the new amount represents some 1.7% of oil output worldwide.

OANDA senior market analyst Edward Moya was quoted by Reuters as saying: “The decision seems to be more of a housekeeping move that will narrow the gap between their current target and the over-compliance we have seen from the alliance.”

Russian Energy Minister Alexander Novak said that a panel of ministers representing OPEC and non-OPEC recommended the cuts. The representatives were led by Russia. More details are yet to be decided during an OPEC+ meeting later today in Vienna.

According to Reuters, any increases in oil prices from the OPEC+ output cut are expected to benefit American producers who are not part of any supply curbing agreement.

Rystad Energy said in a note: “North American shale supply will continue growing even in an environment with lower oil prices.”