S&P/ASX 200 Index (ASX: XJO) energy shares are in the red today.
This comes as global oil prices resumed their downward trend overnight following yesterday's contentious meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
Here's how these energy stocks are tracking in Friday morning trade:
- Beach Energy Ltd (ASX: BPT) shares are down 0.3%
- Woodside Energy Group Ltd (ASX: WDS) shares are down 0.9%
- Santos Ltd (ASX: STO) shares are down 0.7%
For some context, the ASX 200 is down 0.5% at this same time.
So, why are ASX 200 energy shares sliding on the heels of the OPEC+ meeting?
ASX 200 energy shares down amid cartel infighting
The demand side outlook for oil remains relatively strong in 2024.
While global demand growth is forecast to slow from this year, the International Energy Agency still expects the world's oil demand to hit a new record high of 102.9 million barrels per day in 2024.
It's the supply side, rather, that's putting downward pressure on oil prices and throwing up headwinds for ASX 200 energy shares.
And with the United States, the world's top oil producer, pumping a record 13.2 million barrels per day in September amid building crude inventories, investors were hoping OPEC+ would take a sizeable bite out of global supplies.
While Saudi Arabia and some member nations shared that goal, it was far from unanimous.
Angola, for example, was instructed by the cartel to slash 200,000 barrels per day from its output, which would bring the African nation's production to 1.1 million barrels per day.
But Angola balked at those directions.
"We will produce above the quota determined by OPEC," the nation's OPEC governor Estevao Pedro said (quoted by Bloomberg).
Pedro added, "It is not a matter of disobeying OPEC; we presented our position, and OPEC should take it into consideration."
The Brent crude oil price has dipped 2.2% over the past 12 hours to US$82.82 per barrel. That's now down 14% since 27 September, when Brent crude was fetching US$96.55 per barrel.
Still, a number of members, including Russia and the UAE, did agree to cut a combined additional 900,000 barrels per day from their output. And Saudi Arabia agreed to extend its own one million barrel per day cut through Q1 2024.
But that wasn't enough to send oil prices – or ASX 200 energy shares – higher, as many investors had been hoping.
"Crude is cratering because so far traders have yet to see concrete evidence of credible incremental output cuts alongside the continuation of voluntary Saudi and Russian cuts," Bob McNally, president of Rapidan Energy Group said.
And investors are leery of the wording, which appears to make the cuts optional.
According to Giovanni Staunovo, an analyst at UBS Group (courtesy of Bloomberg):
It seems the OPEC+ production cuts are 'voluntary' cuts, not part of an OPEC+ agreement. Hence the concern is that a large fraction of it could be a pledge on paper and effectively less barrels being removed from the market.
While more supply and lower oil prices will be welcomed by motorists and aid the RBA in its inflation battle, ASX 200 energy shares could be looking at lower revenues than markets have been pricing in.