New York — Oil fell 4% a barrel on Monday after the Organisation of the Petroleum Exporting Countries and allies (Opec+) agreed to ease output cuts last week.
Brent crude for June settled at $62.15 a barrel, down $2.71, or 4.2%. US West Texas Intermediate settled at $58.65 a barrel, shedding $2.80, or 4.6%.
The Opec+ agreed on Thursday to hike production monthly from May to July. Opec member Iran, exempt from making voluntary cuts, is also boosting supply.
“The timing was not good,” said Bob Yawger, director of energy futures at Mizuho Securities. “It seemed like Opec+ was going to roll the deal, but they didn’t and now it looks like they’re going to have to pay at least in the short term.”
Under Thursday’s agreement, Opec+ cuts would be just above 6.5-million bpd from May, compared with slightly below 7-million bpd in April. Most of the increase in supplies will come from the world’s top exporter, Saudi Arabia, which said it was phasing out its extra voluntary cuts by July, a move that will add 1-million bpd. After that, Saudi Aramco raised official selling prices for May to Asia on Sunday.
Oil has recovered from historic lows in 2020 with the support of record Opec+ cuts, most of which will remain after July.
This week, investors are focused on indirect talks in Vienna between Iran and the US as part of broader negotiations to revive the 2015 nuclear deal between Tehran and global powers. Ahead of the talks, Iran’s foreign ministry said it wanted the US to lift all sanctions and rejected any “step-by-step” easing of restrictions.
Eurasia’s analyst Henry Rome said he expects US sanctions, including restrictions on the sale of Iranian oil, to be lifted only after these talks are completed and until Iran returns to compliance.
“Diplomacy could stretch for months and nuclear compliance could take as long as three months,” he said in a note, adding that implementation of such a deal and a ramp-up of oil exports could stretch into early 2022.
The global economic outlook has also become clouded by another wave of coronavirus infections. Cases have spiked in India, Canada and other nations. France tightened lockdowns to head off the disease’s spread.
The US saw job growth exceed 900,000 in March, but US caseloads have surged as well, even though it has been among the fastest countries to vaccinate residents.