DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange settled Thursday's session lower following news Angola has decided to quit the Organization of the Petroleum Exporting Countries (OPEC) which comes on the heels of a disagreement with Saudi Arabia over its 2024 production quota, highlighting disunity within the producers' alliance.

After 16 years of membership, Angola said it decided to abandon the OPEC quota system to pursue private investments to expand its oil industry.

"We feel that at the moment Angola does not gain anything by remaining in the organization and, in defense of its interests, it has decided to leave," said João Lourenço, president of Angola, according to the Angola Press Agency.

The decision came after OPEC+, chaired by Saudi Arabia and Russia, on Nov. 30 lowered the African producer quota for next year to 1.28 million barrels per day (bpd) from 1.455 million bpd, citing consistent underperformance on its output targets. Notably, Angola's oil production averaged 1.13 million bpd in November, according to OPEC's latest Monthly Oil Market Report, well below its allotted quota.

Angola suffered a steep production decline during the pandemic years when global oil demand plunged leading to a lack of investment in the country's oil infrastructure. In December 2019, Angola oil production averaged 1.408 million bpd. Given Angola's desire to attract foreign investment for its oil industry, a lower production quota from the OPEC+ would be a disincentive for companies to invest in the country.

Thursday's move lower in the oil complex also follows a bearish inventory report released Wednesday by the Energy Information Administration (EIA) showing total U.S. oil and petroleum product supplies jumped 9.5 million barrels (bbl) last week as domestic oil production rose 200,000 bpd to a new record high 13.3 million bpd.

Domestic oil stockpiles, excluding Strategic Petroleum Reserves, increased 2.9 million bbl during the week ended Dec. 15, missing expectations for a 2.5 million bbl drawdown, while pushing inventories about 1% above the five-year average.

In its latest Drilling Productivity Report released Monday, EIA estimated oil production at the prolific Permian Basin in west Texas and east New Mexico, would climb to a new record high 5.986 million bpd in January, up 218,621 bpd or 38% from January 2022. Bakken oil production in North Dakota is expected to see a 2,000-bpd gain in January to 1.308 million bpd, a fresh record high. Projected output in January would represent a 214,526 bpd or 19.6% year-on-year increase in oil production at the North Dakota basin.

Bearish elements in the weekly EIA report could also be found in refined products, with gasoline stockpiles rising 2.7 million bbl, while distillate stocks increased 1.5 million bbl compared with expectations for a 700,000 bbl build. U.S. refining capacity utilization rate rose 2.2% to 92.4%, which compares with 90.9% run rate a year earlier.

At settlement, NYMEX West Texas Intermediate futures for February delivery declined $0.33 to $73.89 bbl, while Brent slipped $0.31 to $79.39 bbl. NYMEX RBOB January futures fell $0.0422 gallon to $2.1585 gallon, and NYMEX ULSD January contract dropped back $0.0117 to $2.6968 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com.