Oil falls $1 after OPEC+ agreement on boosting supply

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TOKYO – Oil prices fell more than $1 a barrel on Monday, after the group of OPEC+ producers overcame internal divisions and agreed to increase production, raising some concerns about a crude oil surplus due to contamination. COVID-19 continues to rise in many countries.

Brent crude fell $1.08, or 1.5%, to $72.51 a barrel at 02:20 GMT, after falling nearly 3% last week. US oil fell 1.01 cents, or 1.4%, to $70.80 a barrel, down nearly 4% last week.

OPEC+ ministers on Sunday agreed to increase oil supplies from August to lower oil prices that earlier this month climbed to a 2-1/2-year high as the global economy recovers from the post-coronavirus pandemic. COVID-19 pandemic.

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The group, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, has agreed to share new production from May 2022.

“Oil prices could continue to fall in the coming weeks,” Goldman Sachs said.

However, the US investment bank said it remained optimistic about the oil price outlook and that the deal was in line with its view that producers “should focus on maintaining a tight physical market”. while also guiding future capacity higher and limiting competing investments.”

It said the OPEC+ deal represents a $2 “up” over the summer forecast for Brent crude reaching $80 per barrel and a $5 increase for the international standards outlook averaging $75 per barrel. next year.

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To overcome internal divisions, OPEC+ agreed to new production quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

“This agreement will give market participants the comfort that the group will not lead to a messy breakup and will not open production facilities any time soon,” said RBC Capital Markets.

Last year, the group cut production by a record 10 million barrels per day (bpd) amid evaporating demand due to the pandemic, which sent US oil prices crashing, at one point into negative territory.

It has gradually brought in some supply, causing it to drop by about 5.8 million bpd. (Reporting by Aaron Sheldrick; Editing by Lincoln Feast and Richard Pullin)