Oil futures: Crude sinks 3.5% as OPEC+ unwinding plan offsets extension

Quantum Commodity Intelligence – Crude oil futures Monday were sharply lower as investors shrugged off the OPEC+ extension to current output quotas, instead focusing on the group's plan to start unwinding cuts from October of this year.

Front-month Aug24 ICE Brent futures were trading at $78.20/b (1810 GMT), sinking below $80/b for the first time since February, and compared to Friday's settle of $81.11/b.

At the same time Jul24 NYMEX WTI was trading at $74.02/b, versus Friday's settle of $76.99/b.

OPEC+ moved to shore up prices by maintaining the additional 2.2 million bpd of voluntary cuts until at least October, while at the same time extending wider group cuts until the end of 2025.

But the market was left unimpressed, with the most recent package of voluntary cuts set to be unwound starting from October of this year.  

Analysts said that the announcement that the group will start unwinding cuts this year offset the initial upside from the extended cuts, with several members seemingly keen to boost production.

"The communication of a gradual unwind reflects a strong desire to bring back production of several members given high spare capacity," said Goldman in a client report.  

Prices have also been weighed down by poor refining margins, with sluggish distillate cracks also joined by a struggling gasoline market.

"Chinese refiners are considering rate run cuts due to adequate onshore inventories. Margins, particularly gasoline cracks, are at multi-year lows, excluding the Covid period," Mike Muller, head of Asia at Vitol, told the Gulf Intelligence energy markets podcast on Sunday.

Quantum data shows that the gasoline market structure flipped to contango in Asia last week and Atlantic gasoline looks set to follow.