Oil drops after OPEC +, but markets remain tight

LONDON (Reuters) – Brent crude oil fell 1 percent on Monday, as investors prepare for an additional 1 million barrels a day to reach markets after OPEC and its partners agreed to take a break. to increase their production.

Despite this increase, which aims to prevent the gap between global supply and demand becoming too great, analysts believe that global oil markets should remain relatively tense this year.

The Brent Brent LCoC1 futures contract fell 78 cents to 74.78 dollars a barrel at 09:17 GMT, while the US light crude Clc1 was up 25 cents to 68.83 dollars a barrel, supported in part by a supply breakdown in Canada.

Prices first jumped after an OPEC agreement to increase production was announced last week, as the supply was seen to rise as much as some expected .

OPEC member countries and non-OPEC countries, including Russia, have reduced their production by 1.8 million bpd since 2017 to tighten the market and support prices.

"So far, there is no plan for how the boundaries will be reallocated.A simple approach would be to reduce the 600,000 bpd and increase the 600,000 bpd limits. j member limits, which would allow full compliance, "said Callum MacPherson, Head of Commodities at Investec.

"However, it seems unlikely that members like Venezuela are giving up unused limits in this way, instead unused limits could be left in place, so 100% compliance would mean in theory 1, An additional 2 million bpd on the market, although this would not be practical.

Largely because of unforeseen disruptions in places like Venezuela and Angola, the group's output has been lower than targeted reductions, which will now be offset by increases in supply, particularly from of OPEC in Saudi Arabia. Analysts warn though that there is little spare capacity for large-scale production increases.

After an official meeting Friday, OPEC gave a press conference on Saturday that implied a larger increase in supply.

"Saturday's OPEC + press conference brought more clarity on the decision to increase production, with forecasts for an increase of 1 million bpd at 2:18," Goldman Sachs said in a statement. a note on Sunday.

"This is a bigger increase than the one presented on Friday, although the goal remains to stabilize stocks, not to generate a surplus," the US bank added.

Edward Bell, commodity analyst at the Emirates NBD Bank of Dubai, said that when the Vienna agreement would have entered the market, he was expecting prices "between $ 65 and $ 70 a barrel for the rest of the year ".

Goldman Sachs also warned that a "power outage at Syncrude Canada's oil sands plant could cause North America to miss 360,000 b / d of electricity." supply for the whole month of July.

He added that this "will exacerbate the current global deficit, making it all the more necessary to increase the production of OPEC".