LONDON (Reuters) – Oil fell on Monday, in line with further declines in global stock markets, erasing the gains made last week when producer group OPEC and other key exporters agreed to cut their crude output from January.
Brent crude oil futures fell $1.02 on the day to $60.65 a barrel by 1045 GMT, while U.S. futures lost 98 cents to trade at $51.63 a barrel.
Prices rose 3 percent on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia said they would cut oil supply by 1.2 million barrels per day (bpd).
“They had one thing in common – none of them wanted to see inventories rise further. They could disagree on prices and upon the size of the cuts, but to really see inventories moving higher? No one wanted that,” SEB commodities strategist Bjarne Schieldrop said.
“Firstly, we’ll get some (price) stability, even if oil is weighed down by bearish equities. That really took the glow off oil,” he said.
OPEC has agreed to cut by 800,000 bpd, led mainly by Saudi Arabia, while non-members will cut by 400,000 bpd, with most of that decrease shouldered by Russia.
“Friday’s agreement was a seemingly good one, or maybe we should say the best one under the current circumstances,” Tamas Varga, a strategist with PVM Oil Associates, said.
“As good as it looks, our view is that it will not be able to provide long-term price supports because it could not help global oil inventories deplete.”
Global equities have fallen by nearly 8 percent so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from an escalating trade dispute between the United States and China.
A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers – the United States, Saudi Arabia and Russia – has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.
“The surge in U.S. supply in recent months should be a reason for caution,” Bank of America Merrill Lynch said in a note on Monday.
Edward Bell of Emirates NBD bank said “the scale of the cuts … isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels”.
Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30 percent in value.
Reporting by Henning Gloystein; Editing by Christian Schmollinger and Gareth Jones