U.S. crude oil falls more than 2% as skepticism mounts over OPEC+ cuts

U.S. crude fell more than 2% on Thursday, erasing early gains, as traders grew more convinced that OPEC+, a group composed of OPEC plus its oil-producing allies, will not deliver on promised output cuts.

The West Texas Intermediate contract for January fell $1.98, or 2.54%, to $75.88 a barrel, while the Brent contract for January lost 25 cents, or 0.3%, to trade at $82.85 a barrel.

OPEC+ released a statement Thursday that did not reference new, formal output cuts from the group, but countries started issuing individual statements afterward.

Saudi Arabia agreed to extend its voluntary production cut of one million barrels per day through the end of the first quarter of 2024, a source in the Energy Ministry told the Saudi Press Agency.

Russia deepened its voluntary supply cut to 500,000 bpd through the end of the first quarter, according to a statement from Deputy Prime Minister Alexander Novak.

Traders are concerned that the cuts are voluntary and not mandatory, raising the question of whether OPEC+ can really follow through and curtail output, according to Phil Flynn, an analyst with the Price Futures Group.

“The proof is going to be in the pudding,” Flynn said. “Instead of having a clear answer to what is going to happen we only have a promise — the promise is making people nervous,” Flynn said.

OPEC+ has a major problem when it comes to cohesion and compliance on output cuts, said John Kilduff with Again Capital.

“Cheating is their middle name when it comes to these situations — OPEC that is,” Kilduff told CNBC’s “Squawk on the Street” Thursday morning. “They’re like dieters around a dessert table in terms of trying to hold together and comply — they don’t have a good track record with it.”

Kilduff said OPEC+ is getting squeezed by record production in nations including the U.S. and is losing market share in Asia.

This is a developing story. Please check back for updates.