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Oil: OPEC+ agrees to cut production by 1M barrels per day

Crude oil (CL=F, BZ=F) prices dip following reports that OPEC+ member countries have agreed to cut oil production output by 1 million barrels per day in 2024. Yahoo Finance Senior Reporter Ines Ferré monitors energy market trends on these headlines, including commentary from various analysts and what this may mean for gas prices (RB=F)

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

RACHELLE AKUFFO: We're watching oil this morning. Multiple sources are reporting that OPEC+ members have agreed to cuts of at least 1 million barrels per day for early next year. Here with the details of this agreement is our very own Ines Ferré. Hey, Ines.

INES FERRE: Hey, Rachelle. Yeah, and so we saw oil earlier going higher when the announcement was made that OPEC+ had agreed to an additional 1 million barrels a day of cuts. That's on top of the unilateral cuts from Saudi Arabia.

But we're watching right now that oil prices are lower. We're gonna pull up our Wi-Fi interactive so you can see WTI is down more than 2%. You've got Brent Crude that also has dropped in recently.

And why is this? Well, it turns out that we're still waiting for some of the details about these production cuts. But it could be a little bit of a repackaging of the same, meaning that it's looking like the additional million barrels a day of cuts won't be formalized into a new official output target.

Instead, what we're expecting is that member states will individually be announcing their contributions. So traders are looking at this like, ah, it's maybe a little bit of the same. Look, before this announcement came out, there was an expectation in the markets that OPEC+ would be rolling over its current cuts that it has this year into next year and that Saudi Arabia could be extending its unilateral cuts of 1 million barrels a day.

And so what traders were also expecting was perhaps a deepening of cuts. But so it looks like what is being announced, the details are going to determine a lot. But what we're looking at now is traders sort of reacting to, OK, this looks like it may be a little bit more of the same.

You also have increased demand going into next year. Analysts have been talking about production increase in the US and Guyana and Brazil as well. And so they're talking about this being a balancing act, balancing between what you've got with supply and demand.

Look, these OPEC cuts are expected to create a floor, a floor on prices because we have seen the outlook for demand weaken a little bit. And they are trying to create a pricing floor here, guys.

AKIKO FUJITA: Yeah, and as you talk about a pricing floor-- I mean, we have seen a steady decline in gas prices over the last 60 days or so-- what are you hearing from analysts about how much further we're likely to see these prices fall given some of the supply dynamics you just pointed to?

INES FERRE: Yeah, well, those prices are supposed to fall into the end of this year. And then going into the spring, as you have an uptick in demand, you're expected to see prices increasing seasonally as you would expect.

If the oil prices that we're watching right now go up because of these production cuts, if we do see a supply squeeze of some kind, then you could feel a bit of a sting at the pump. KPMG's analyst just came out with a reaction to these production cuts basically saying that production increases in the US and other places, that's gonna soften the blow that's caused by these cuts. But that doesn't consumers at the pump won't feel a sting should a gasoline prices go up.

But seasonally, they're expected to continue their downward trend as we have been watching. You're looking at gasoline averages at $3.25 per gallon. But going into the spring summer of next year, expect to see an uptick.