Oil prices slumped more than 2 per cent on Friday following a volatile trading week, as the market kept a wary eye on the latest round of OPEC+ production cuts and sluggish global manufacturing activity.
Brent crude futures for February settled $1.98 lower, or 2.45 per cent, to $78.88 a barrel on their first day as the front-month contract.
U.S. West Texas Intermediate crude futures (WTI) dropped $1.89, or 2.49 per cent, to $74.07 a barrel.
For the week, Brent posted a decline of about 1.9 per cent and WTI recorded a drop of over 1.6 per cent.
OPEC+ producers agreed on Thursday to remove around 2.2 million barrels a day (b/d) of oil from the global market in the first quarter of next year, with the total including a rollover of Saudi Arabia and Russia’s 1.3 million b/d of current voluntary cuts.
Traders viewed the announcement with some skepticism, OANDA analyst Craig Erlam said.
“(It) seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient,” Erlam added.
OPEC+, which pumps more than 40 per cent of the world’s oil, is focusing on reducing output as prices have fallen from about $98 a barrel in late September amid concerns over weaker economic growth in 2024.
The cuts “will not stop a billowing cloud of confusion that is going to take the oil market weeks and months to figure out, and only if the self-reporting data is indeed reliable,” PVM analyst John Evans said.
In the United States, Federal Reserve Chair Jerome Powell said on Friday that the central bank would move “carefully” on interest rates as risks of “under- and overtightening are becoming balanced.”
U.S. manufacturing remained subdued and factory employment fell in November, according to a survey.
Investors are keeping a watchful eye on global manufacturing activity, which remained weak during the month on poor demand, surveys showed.
On Friday, talks to extend a week-long truce between Israel and Palestinian militant group Hamas collapsed, prompting a resumption in the war in Gaza, which could lead to disruption in global oil supply.
On the supply side, the United States on Friday imposed additional sanctions related to the price cap on Russian oil, targeting three entities and three oil tankers.
U.S. oil rigs rose five to 505 this week, their highest since September, energy services firm Baker Hughes said in its closely followed report on Friday.
Meanwhile, U.N. Secretary General Antonio Guterres on Friday called for a future with no fossil fuel burning at all while speaking at the two-week COP28 summit in the UAE.
Money managers cut their net long U.S. crude futures and options positions in the week to Nov. 28 by 7,663 contracts to 62,070, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.