Oil Prices Decline following OPEC Production Cut

It’s been reported that oil prices declines on Friday in Asia, despite reports that OPEC ministers decided to cut the oil output by 1.5 million barrels per day. The cut in oil prices is reportedly to be conditional on approval from Russia.Oil suffered its largest weekly decline since 2008 causing concern over demand due to COVID-19.

14-member group added that the group would review this policy at its next meeting on June 9. A meeting of both OPEC and OPEC+ members later in the day is in focus. There is a need of Russia’s willingness for deeper the production cuts are uncertain, as the recent reports suggested that Moscow is in favor of an extension, to the current level of cuts rather than a further reduction.

The news failed to boost oil prices today however, as declining U.S. equities put the pressure on oil markets.

The U.S. Crude Oil WTI Futures were down 1.3% to $45.31 by 12:30 AM ET (04:30 GMT). The international Brent Oil Futures also shed 1.3% to $49.33.

The traders will be paying more attention on the upcoming nonfarm payroll report. And the economists are forecasting the figure to gain by 175,000 last month, according to forecasts compiled by Investing.com.

The jobless rate is seen holding steady at 3.6% and the average hourly earnings are expected to have gain 0.3%, or up 3% on an annual basis.

OPEC pushes for production cuts as crude oil demand forecasts take a hit. Ed Moya of online trading platform OANDA said,

“The coronavirus economic impact could finally be hitting the U.S. labor market,”
“If the strongest part of the U.S. economy starts to weaken, recession concerns will grow quickly.”

“Also, this is a critical moment for OPEC+ as a holdout by the Russians could drive oil prices to their financial crisis lows.”

Despite some recovery this week, WTI remained down 24% on the year and Brent down 23%.