Oil fell further towards $50 a barrel on Monday, pressured by uncertainty over whether an OPEC-led production cut will be extended beyond June in an effort to counter a glut of crude. A committee of ministers from OPEC and outside producers agreed on Sunday to look at prolonging the deal, stopping short of an earlier draft statement that said the committee recommended keeping the measure in place.
International benchmark Brent crude was down 19 cents at $50.61 by 0857 GMT, after falling as low as $50.26. U.S. crude was down 31 cents at $47.66. “These are troubling times for oil bulls,” said Stephen Brennock of oil broker PVM. “Against a backdrop of rising U.S. crude output and underwhelming OPEC-led efforts to normalize bulging global oil inventories, positives are in short supply.”
A number of ministers from the Organization of the Petroleum Exporting Countries and other producers met in Kuwait to review the progress of their supply cut, which initially runs until the end of June. OPEC and 11 other producers including Russia agreed in December to reduce their combined output by almost 1.8 million barrels per day in the first half of this year.
While many in OPEC have called for prolonging the curbs, Russia has been less definitive. Energy Minister Alexander Novak said on Sunday it was too early to say whether there would be an extension. “We would see the relative lack of reaction in the price perhaps as a reflection of some disappointment that nothing more concrete was forthcoming,” analysts at JBC Energy said in a report, referring to the conclusion of Sunday’s talks.
There is “increasing scepticism” in the market as to whether a rollover of the cuts can be agreed, JBC added. Oil also came under pressure from further evidence that higher prices as a result of the OPEC-led supply cut are helping boost supplies in the United States.
U.S. drillers added oil rigs for a 10th week in a row, data from energy services firm Baker Hughes showed on Friday, as energy companies boost spending on new production. Because of higher U.S. output and the cuts by OPEC, the discount of U.S. crude to Brent has grown to around $2.90 per barrel, heading for its widest close since late 2015. Despite ample inventories and rising U.S. output, Goldman Sachs said the market was rebalancing and it may not be necessary to keep output curbed.