Oil prices fall on expected output rise in wake of OPEC deal
Singapore. Brent crude oil prices fell over 1.5 percent on Monday as traders factored in an expected output increase that was agreed at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna on Friday.
Brent crude futures LCOc1, the international benchmark for oil prices, were at $74.21 per barrel at 03.43 GMT, down 1.8 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $68.40 a barrel, down 0.3 percent, supported more than Brent by a slight drop in U.S. drilling activity.
Largely because of unplanned disruptions in places like Venezuela and Angola, the group’s output has been below the targeted cuts, which it now says will be reversed by supply rises especially from OPEC leader Saudi Arabia. Although analysts warn there is little space capacity for large-scale output increases.
“Several ministers suggested that (rises) would correspond to a 0.7 million bpd increase in production,” said U.S. bank Goldman Sachs following the announcement of the agreement, although it added that were risks “that Iran production may be even lower than we assume” and that its output could fall further due to looming U.S. sanctions.
Still, Britain’s Barclays bank said OPEC’s and Russia’s commitments would take “the market from a -0.2 million bpd deficit in H2 2018 to a 0.2 million bpd surplus”.
Energy consultancy Wood Mackenzie said the agreement “represents a compromise between responding to consumer pressure and the need for oil-producing countries to maintain oil prices and prevent harming their economies”.
In the United States, U.S. energy companies last week cut one oil rig, the first reduction in 12 weeks, taking the total rig count to 862, Baker Hughes said on Friday.