The OPEC oil cartel led by Saudi Arabia and allied producers headed by Russia failed to produce a joint output reduction target on Thursday but did agree to voluntary curbs on production of more than 2 million barrels per day (bpd) for early next year.
The announcement came after an online meeting of the OPEC+ oil ministers, who also declared that Brazil would join the bloc in January, bringing one of the world's fastest-growing oil producers into an alliance that is trying to rein in global supply.
Oil prices fell after rising by more than 1% earlier in the session after Saudi Arabia, Russia and other members of OPEC+, who pump more than 40% of the world's oil, announced the voluntary cuts through the first three months of next year.
Benchmark Brent crude for February futures were over 2% lower to just under $81 a barrel at 6:36 p.m. GMT. The front-month January contract is due to expire on Thursday.
"The market reaction implies disbelief in the full efficacy of the cuts," JP Morgan analyst Christyan Malek said.
"However, setting a new framework for each member to deliver on its cut reflects the degree of trust and cohesion among the members; case in point, the fact Brazil is joining is testament to the strength in numbers for OPEC+."
The group met to discuss 2024 output amid forecasts the market faces a potential surplus and as a 1 million bpd cut by Saudi Arabia was set to end next month.
OPEC+'s output of some 43 million bpd already reflects cuts of about 5 million bpd aimed at supporting prices and stabilizing the market.
The total curbs amount to 2.2 million bpd from eight producers, OPEC said in a statement, having not announced the details initially. Included in this figure, is an extension of the Saudi and Russian voluntary cuts of 1.3 million bpd.
The 900,000 bpd of additional cuts pledged on Thursday includes 200,000 bpd of fuel export reductions from Russia, with the rest divided among six members.
Russian Deputy Prime Minister Alexander Novak said Russia's voluntary cut would include crude and products.
The United Arab Emirates (UAE) said it had agreed to cut output by 163,000 bpd while Iraq said it would cut an extra 220,000 bpd in the first quarter.
Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan and Algeria were among producers who said cuts would be unwound gradually after the first quarter, market conditions permitting.
OPEC+ is focused on lower output with prices down from near $98 in late September and concerns brewing over weaker economic growth in 2024 and expectations of a supply surplus.
Sweeping cutbacks from OPEC+ and individual member countries since October 2022 have not made lasting changes to oil prices because of concerns about too much crude circulating in a weakening global economy, which could weigh on the thirst for oil for travel and industry.
The market even shrugged off the new move, though it amounts to roughly 2% of global supply.
Jorge Leon, senior vice president of oil market research for Rystad Energy, called it a "bit of disappointing meeting" for OPEC+ and a "bittersweet" one for Saudi Arabia in particular because it couldn't convince the whole group to commit to production cuts.
The market also was let down, because it "was likely expecting a deal covering the first half of next year," he said.
The International Energy Agency (IEA) this month forecast a slowdown in 2024 demand growth as "the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves."
The OPEC+ meeting coincides with the opening of the U.N. COP28 climate summit being hosted by the UAE.