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Oil fell after Saudi Arabia said it wouldn’t continue its additional, deeper output curbs after June.
Futures in New York slipped 1.2% after rising as much as 2.3% earlier. Saudi Arabia — which had curtailed production by more than its agreed quota — said June 8 that those extra reductions will last just one month as planned, as the measures have served their purpose. The wider OPEC+ group agreed over the weekend to extend its record output curbs.
The extension of the existing limits is a victory for Saudi Arabia and Russia, which were deadlocked in a brutal price war just two months ago. OPEC+’s de facto leaders showed their commitment to shore up oil markets globally, and even cajoled Iraq, Nigeria and other laggards to fulfill their promises to reduce production.
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Still, hundreds of thousands of barrels of oil could return to the market with Saudi Arabia, together with allies Kuwait and the United Arab Emirates, unwinding their additional cutbacks.
“Crude oil has run out of steam with the market concluding that all the news and action from OPEC+ was already priced in,” said Ole Hansen, head of commodities strategy at Saxo Bank. Saudi Arabia’s comments on voluntary cuts “added to the turnaround” seen in the market, he said.
The OPEC+ cuts and rebounding demand have helped double oil prices since April. China’s crude imports surged to a record high last month, while consumption in other major economies such as India is improving.
Following the extension deal on June 6, Saudi Arabia pressed on by increasing some crude prices by the most in at least two decades. The hikes erased almost all of the discounts the kingdom made during its brief price war with Russia, with the steepest increases hitting July exports to Asia.
But a sustained rebound in prices may be hampered by deteriorating relations between Washington and Beijing, or returning supplies in the U.S. and Libya.
Libya’s biggest oil fields are gradually resuming production after a five-month shutdown due to civil war. Output will start at an initial 30,000 barrels a day at Sharara and it will take three months to return to full capacity, according to National Oil Corp. Supply from El-Feel also restarted on June 7, according to a person with direct knowledge of the situation.
Meanwhile, as OPEC met virtually over the weekend, then-Tropical Storm Cristobal was swirling over the Gulf of Mexico. Offshore drillers idled about a third of oil production, amounting to about 636,000 barrels of daily output, due to the storm, according to the Bureau of Safety and Environmental Enforcement. The storm has now crossed the coast.
With assistance from Serene Cheong
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