© Reuters. FILE PHOTO: A sticker says Crude Oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, the United States, Nov. 22, 2019. REUTERS / Angus Mordant / File Photo
By Noah Browning
LONDON (Reuters) – Oil prices fell sharply on Monday after OPEC + overcame internal divisions and agreed to ramp up production, raising concerns about a crude oil surplus as COVID-19 infections rise in many countries.
Brent crude fell $ 1.92, or 2.6%, to $ 71.67 a barrel by 1105 GMT. U.S. oil fell $ 1.94, or 2.7%, to $ 69.87 a barrel.
OPEC + ministers agreed on Sunday to increase oil supplies to cool prices starting in August, which this month reached their highest level in more than two years as the global economy recovers from the COVID-19 pandemic.
The group of members of the Organization of Petroleum Exporting Countries (OPEC) and allies such as Russia also agreed on new production shares from May 2022.
"Longer-term, free and additional production capacities from OPEC + countries are the main reason that the oil price is falling again," said Julius Baer analyst Carsten Menke.
"We remain confident that the oil market is in the final phase of its boom."
However, Goldman Sachs (NYSE 🙂 said it remains bullish on the outlook for oil and the deal matches its view that producers should focus on maintaining a tight physical market while looking for higher future capacity and competing Discourage investment. "
(Graphic: Graphic: deadline curve stunted after OPEC + deal: https://fingfx.thomsonreuters.com/gfx/ce/qzjvqxxwbpx/BrentCurveJuly19vsJuly62021.png)
OPEC + cut production by a record 10 million barrels per day (bpd) last year as demand fell due to the pandemic, causing prices to fall, with US oil futures contract prices eventually falling into negative territory .
OPEC + producers have gradually relaxed their production restrictions, which are now around 5.8 million bpd.
To overcome internal divisions, OPEC + has agreed new production quotas for several members from May 2022, including the United Arab Emirates, Saudi Arabia, Russia, Kuwait and Iraq.
"Even with higher production, the market remains relatively tight," said ANZ Research. "High-frequency data shows encouraging signs for oil, with US gasoline demand hitting a record high recently. This should limit the length of time it can sell."
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