LONDON: Oil slipped on Monday after Saudi Arabia said that an extension of output cuts by OPEC+ nations would not include additional voluntary cuts by a trio of Gulf producers.
Brent crude was down 65 cents, or 1.5pc, at $41.65 a barrel by 1400 GMT, while US West Texas Intermediate (WTI) crude fell 72 cents, or 1.8pc, to $38.83.
The Organization of Petroleum Exporting Countries, Russia and other producers – a group known as OPEC+ – agreed in April to cut supply by 9.7 million barrels per day (bpd) in May and June. They agreed on Saturday to sustain those cuts through July.
After the extension was agreed, top exporter Saudi Arabia increased its monthly crude prices for July.
However, Saudi energy minister Prince Abdulaziz bin Salman told a news conference on Monday that the kingdom and Gulf allies Kuwait and the United Arab Emirates would not cut by an extra 1.18 million bpd in July as they are doing this month.
Those cuts were in addition to the 9.7 million bpd OPEC+ plan.
“It would be too good to be true to have a total of nearly 11 million bpd in voluntary cuts extended for a month at times when we see supply deficits,” said Bjornar Tonhaugen at Rystad Energy.
“Keeping those bonus cuts would just not be justified for the three Gulf producers.”
Low prices have prompted Chinese buyers to boost imports, with purchases by the world’s largest crude importer hitting a record high of 11.3 million bpd in May.
But consultancy JBC Energy warned that higher prices could discourage buying and undercut a fragile recovery in demand.
“We cannot shake the feeling that, price-wise, this market has gotten a bit ahead of itself and will need a good confluence of bullish surprises to continue in order to maintain current pricing levels,” JBC said in note.
