On Monday, oil prices edged up after losing the significant gains earlier as the market’s expectations on the prolonged oil cut pact did not last.
By 02.39 GMT, Brent crude oil futures went up by merely 0.5% or 21 cents at USD42.51/barrel after actually hit a high of USD43.41/barrel earlier. US WTI touched USD40.44/barrel earlier but only managed to score a 0.05% increase to USD39.57/barrel after.
On Saturday, the Organization of Petroleum Exporting Countries and its non-member producer allies (OPEC+) reached the agreement to extend the output cut deal by the third month, until end-July. Saudi Arabia then proceeded to increase its July monthly crude prices.
However, some analysts opined that the market’s expectation was not being fulfilled, resulting in prices failing to propel back to the level prior to March 6 after the Russia-Saudi price war.
Nevertheless, the oil supply might enter a supply deficit in October, supporting the long-term prices.
Regarding the lack of compliance on the production cut deal by some OPEC+ members, some economists expected the issue to continue even when the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance.
Libya, notably, would be a challenge for the alliance as two major oilfields have reopened after months of the blockade.
On a related note, Baker Hughes data showed that the US operating oil and natural gas rig count dropped to a record low for the fifth straight week last week. AS the tropical storm Cristobal entered the Gulf of Mexico, close to 30% of US offshore oil output was shut on Friday.
Economist Harry Tchilingurian of BNP Paribas warned that the higher oil prices could invite the reinstatement of supply, notably U.S. shale, that was planned to be shut-in in June and July. The situation might put an obstacle in OPEC+’s effort to rebalance the oil market.
