Oil prices fall on OPEC production agreement, but markets remain tense

SINGAPORE (Reuters) – Oil prices fell on Monday as traders expected an expected increase of 1 million barrels a day following a meeting of the Organization of the Petroleum Exporting Countries (OPEC). ) in Vienna last week.

Despite this, analysts said the global oil markets are likely to remain relatively tense this year.

Brent LCoC1 crude futures were $ 74.25 per barrel at 0636 GMT, down 1.7% from their last close.

US West Texas Intermediate (WTI) CLc1 crude futures were $ 68.42 a barrel, down 0.2%, supported more than Brent by a slight decline in drilling activity in the United States and a supply outage 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 of the prices. They had planned.

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.

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. Although analysts warn that there is little space 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.

The Dutch bank ING said that "the increase of 1 million bpd announced gives us confidence in our vision of lower prices."

Edward Bell, commodity analyst at the Emirates NBD Bank of Dubai, said that when the Vienna agreement would be put on the market, he expected prices "between $ 65 and $ 70 per barrel for the rest of the year ".

In the United States, US energy companies first cut an oil rig last week, the first reduction in 12 weeks, lowering the total number of platforms to 862, Baker Hughes (GE.N) said Friday.

This allowed the platform to count on its lowest monthly gain since it dropped by two devices in March, with only three devices added in June. However, the overall level remains below the March 2015 peak compared to the previous week.

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".