LONDON (Reuters) – Oil prices fell on Tuesday, weighed down by a stronger dollar and oversupply concerns after it was announced that a trio of Gulf producers would end voluntary output cuts.
FILE PHOTO: Pump jacks operate at sunset in Midland, Texas, U.S., February 11, 2019. Picture taken February 11, 2019. REUTERS/Nick Oxford/File Photo
Brent crude was down 52 cents, or 1.3%, at $40.28 a barrel by 1340 GMT. West Texas Intermediate (WTI) crude fell 27 cents, or 0.7%, to $37.92.
A “slightly stronger U.S. dollar … is weighing on crude prices. Also the prospect of higher production from Saudi Arabia, Kuwait, UAE and Oman in July is not helping prices,” said UBS analyst Giovanni Staunovo.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, a grouping known as OPEC+, on Saturday agreed to extend record cuts of 9.7 million barrels per day (bpd) until the end of July.
Saudi Arabia, however, later said that it, Kuwait and the United Arab Emirates would not extend cuts of 1.18 million bpd they are currently making on top of that OPEC+ target.
As for the OPEC+ pact, de facto OPEC leader Saudi Arabia has called on participants to ensure they comply with their promised cuts.
Azerbaijan on Tuesday said that it has fulfilled its obligations with its compliance at more than 98% in May.
Kazakhstan said it had exceeded its May quota but would compensate for that in coming months.
There are also some concerns that recent signs of improving demand could prompt higher non-OPEC supply.
“Healthy price levels can bring unrestricted production back from other countries, such as the United States and Canada … And if production rises there, prices will of course take a hit,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Goldman Sachs raised its 2020 forecast for Brent to $40.40 a barrel and WTI to $36 but warned that prices are likely to pull back in the coming weeks because of demand uncertainty and inventory overhang.
Also weighing on prices was the resumption of production at Libya’s Sharara oilfield.
A blockade on the 300,000 bpd field was lifted late last week when a pipeline valve was reopened, but an armed faction affiliated with Khalifa Haftar’s Libyan National Army forced workers to stop production at dawn on Tuesday.
Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne and Seng Li Peng in Singapore; editing by Jason Neely and David Goodman