Oil drops 2% as markets mull OPEC+ cuts' efficacy, macroeconomic slowdowns

Oil prices fell by 2% on Wednesday, as investors mulled the effectiveness of OPEC+ cuts against concerns of the potential impact of a worsening macroeconomic outlook on global demand.

Brent crude futures fell $1.59, or 2.06%, to $75.61 a barrel by 1454 GMT. U.S. WTI crude futures fell by $1.67, or 2.31%, to $70.65 a barrel.

The Organization of the Petroleum Exporting Countries and allies such as Russia (OPEC+) agreed on voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024 late last week.

Saudi and Russian officials added this week that the cuts could be extended or deepened beyond March.

But both benchmarks closed at their lowest level since July 6 in the previous session, in what was a fourth straight day of losses.

"The decision to further reduce output from January failed to stimulate the market and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears," PVM analyst Tamas Varga said.

Russian president Vladimir Putin travelled to the United Arab Emirates and Saudi Arabia on Wednesday, to meet with the UAE's President Sheikh Mohammed Bin Zayed Al Nahyan and Saudi Crown Prince Mohammed bin Salman. Oil and OPEC+ were on the agenda.

Thursday's price slide could also be a reaction to Saudi Arabia cutting its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months, Varga added.

Concerns over China's economic health also weighed on prices, after rating agency Moody's lowered the outlook on China's A1 rating to negative from stable on Tuesday.

Meanwhile in the U.S., a drop in exports caused the U.S. trade deficit to widen in October, which could signal that trade could drag on economic growth in the fourth quarter.

A slim majority of economists polled by Reuters are now expecting the Federal Reserve to hold interest rates until at least July, later than earlier thought.

"Clearly traders were already feeling bearish and now oil is back at a five month low and heading for a fifth day of losses," OANDA analyst Craig Erlam said.

(Reporting by Robert Harvey in London, Andrew Hayley in Beijing and Trixie Yap in Singapore, Editing by Louise Heavens and Elaine Hardcastle)