Oil down along with global markets

London — Oil fell on Monday, in line with further declines in global stock markets, erasing the gains made last week when producer group Opec and other key exporters agreed to cut their crude output from January.

Brent crude oil futures fell $1.02 on the day to $60.65 a barrel by 10.45am GMT, while US futures lost 98c to trade at $51.63 a barrel.

Prices rose 3% on Friday after Opec and some non-Opec producers including heavyweight Russia said they would cut oil supply by 1.2-million barrels a day.

“They had one thing in common — none of them wanted to see inventories rise further. They could disagree on prices and upon the size of the cuts, but to really see inventories moving higher? No one wanted that,” SEB commodities strategist Bjarne Schieldrop said.

“Firstly, we’ll get some (price) stability, even if oil is weighed down by bearish equities. That really took the glow off oil,” he said.

Opec has agreed to cut by 800,000 barrels a day, led mainly by Saudi Arabia, while non-members will cut by 400,000 barrels a day, with most of that decrease shouldered by Russia.

Global equities have fallen by nearly 8% so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from an escalating trade dispute between the US and China.

A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers — the US, Saudi Arabia and Russia — has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.

“The surge in US supply in recent months should be a reason for caution,” Bank of America Merrill Lynch said in a note on Monday.

US bank Morgan Stanley said the cut was “likely sufficient to balance the market in the first half of 2019 and prevent inventories from building”.

Not all analysts were so confident.

Edward Bell of Emirates NBD bank said “the scale of the cuts … isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2-million barrels a day in the first quarter with the new production levels”.

Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30% in value.

Reuters