Oil drops after OPEC+ output deal, but markets to stay tight

Oil drops after OPEC+ output deal, but markets to stay tight

However, the market had anticipated a higher rise in supply from the cartel.

As per the new deal, the OPEC will increase about 1 million bpd of oil into the markets, although most of the member countries are now not in a position to ramp up their output immediately.

WASHINGTON (Reuters) - U.S. Energy Secretary Rick Perry told reporters on Monday he believes a deal between OPEC and non-OPEC countries reached last week may not be enough to relieve global oil markets that are stressed by supply constraints.

Brent crude is being pared back by Saudi Arabia's pledge to boost output after an ambiguous Opec pact and contradictory statements from other nations spurred a price jump on Friday, while shrinking stockpiles are supporting West Texas Intermediate (WTI).

Qatar took part in the 4th Opec-Non-Opec Ministerial Meeting held in Vienna yesterday. The spread between the European and American markers narrowed 18 per cent Monday and has nearly halved in under a week. Driving season means greater demand for gasoline and greater demand invariably means higher prices.

This helped further shrink US crude's discount to global benchmark Brent to as small as $4.78.

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In addition to drawing strength from declining crude stock levels, particularly in Cushing Oklahoma, the NYMEX crude contract has also been supported by the loss of Canada's Syncrude, possibly until end July or longer, after a power outage caused the closure of an upgrader last week.

This makes ideal sense, since crude oil prices are now the highest in more than three years, but not everybody is so pessimistic. However, Goldman warned against positioning for the move lower right away, given the current market deficit and low inventories.

On the growing force of US Shale in the crude oil market, Barkindo said OPEC had successfully established a channel of communication with shale oil producers, which he said would further stabilise the market.

Al-Falih signaled that supply would increase by near 1 million barrels a day after the Organization of Petroleum Exporting Countries adopted a pact aimed at lifting output.

"The inability of certain OPEC members to raise production will undoubtedly mean the bulk of production increases will be met by the largest producers, though the distribution of increases between members remains unclear".

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