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Oil futures fell Monday as major oil producing countries were said to consider easing production curbs as global crude demand rebounds from the coronavirus pandemic.
West Texas Intermediate crude for August delivery CL00, -1.03% CL.1, -1.03% on the New York Mercantile Exchange fell 75 cents, or 1.9%, to $39.80 a barrel. The global benchmark, September Brent crude BRN.1, -0.99% BRN00, -0.99%, was off 68 cents, or 1.6%, at $42.56 a barrel on ICE Europe. .
The Wall Street Journal on Saturday reported that an alliance of crude producers led by Saudi Arabia was pushing the Organization of the Petroleum Exporting Countries and its allies to ease oil output curbs as planned beginning in August due to signs that demand is returning to normal after cratering in the wake of coronavirus-related lockdowns.
OPEC and its allies, including Russia, agreed in April to cut global output by 9.7 million barrels a day after collapsing demand and a brief Saudi-Russian price sent crude prices plunging. The Saudi proposal would see the alliance, known as OPEC+, relax its curbs by 2 million barrels a day to 7.7 million barrels beginning in August, the report said.
Analysts played down the overall implications of a move to ease curbs.
“If the group decide to ease cuts from the 1 August, this should not lead to a change in views on the market, with most assuming that OPEC+ would start easing cuts by this stage already,” said Warren Patterson, head of commodities strategy at ING, in a note. “However continuing deeper cuts would be more of a surprise.
But some analysts argued that the potential for oil to see renewed pressure, particularly as the number of coronavirus cases shows a renewed rise in the U.S. and elsewhere, could make some producers reluctant to ease curbs next month.
“OPEC+ could justify the designated increase in production as of now, but if the virus continues to surge globally over the next week, the demand forecast will change, and the oil market could swing heavily back into oversupply territory,” said Edward Moya, senior market analyst at Oanda, in a note.
