Investing.com — Oil prices slumped in early U.S. trade on Monday, as investors assessed a decision by OPEC+ to extend much of its current run of production cuts into 2025.
expiring in August fell by 2.7% to $78.90 a barrel, while crude futures dropped 2.7% to $74.63 per barrel by 10:40 ET (14:40 GMT). Both contracts fell between 0.6% and 1% last week, weighed down in part by concerns that higher-for-longer interest rates could dent demand in the U.S., the world’s top oil consumer.
The Organization of the Petroleum Exporting Countries and its allies including Russia, known as OPEC+, decided to extend its ongoing output cuts of roughly 5.86 million barrels per day well into 2025.
Specifically, it will maintain 3.6 million bpd of reductions until end-2025. Meanwhile, 2.2 million bpd of cuts will be prolonged by three months until the end of September this year and will then be gradually phased out from October until September 2025.
Analysts at Goldman Sachs argued that the move could be bearish for oil prices.
“[T]he communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations,” the Goldman Sachs analysts said in a note to clients.
OPEC+ said it was waiting to see a broader improvement in economic conditions and lower interest rates before it would begin increasing production.
Ambar Warrick contributed to this report.