Brent crude futures for February dropped $2.02, or 2.5%, to $78.84 a barrel by on their first day as the front-month ICE Brent contract.
U.S. West Texas Intermediate (WTI) crude futures fell $1.95, or 2.57%, to $74.01 a barrel.
OPEC+ producers agreed on Thursday to remove around 2.2 million barrels per day (bpd) of oil from the global market in the first quarter of next year, which included a rolling over of Saudi Arabia and Russia’s current 1.3 million bpd of voluntary cuts.
Meanwhile, the U.S. oil rigs rose by 5 week over week but have declined by 122 to 505 total year over year, according to data released by Baker Hughes on Friday.
OPEC+, which pumps over 40% of the world’s oil, is focusing on reducing output as prices have fallen from about $98 in late September amid concerns over weaker economic growth in 2024.
But the market received the news with scepticism and confusion, driven by concerns about compliance given the voluntary nature of the reductions, as well as investors’ prior expectations of deeper cuts.
“There is probably enough in these cuts to stop a full-blown meltdown of price but it 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 on Friday.
“Markets may have been pricing in another larger cut, and it just didn’t meet those expectations,” OANDA analyst Craig Erlam added.
Investors also turned attention to macroeconomic headwinds on the demand side.
“The only real hope for long term balance in the market is for a dramatic improvement in global economic data as we start the new year, that would need to come from a “soft-landing” or even interest rate cuts,” Onyx Capital Group chief executive Greg Newman told Reuters on Friday.
Global factory data remained weak in November on poor demand, surveys showed, as the euro zone kept contracting but mixed signals surfaced on the Chinese economy.