One-month extension in output cuts has dashed market hopes for a three-month deal, analyst says
08 June 2020 - 07:48Singapore — Oil crept higher on Monday, but gave up big early gains as optimism over major crude producers’ deal to extend record output cuts gave way to disappointment that the accord didn’t extend beyond end-July.
On Saturday Opec+ agreed to extend the deal by a third month through end-July. Following the deal, world’s top exporter Saudi Arabia sharply raised its monthly crude prices for July. Still, the current deal is expected to lead the market into a supply deficit by October, underpinning prices in the longer run, he added.“While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still say they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
Even as oil prices recovered, they are still well below the costs of most US shale producers, leading to shutdowns, layoffs and cost-cutting in the world’s largest producer.
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