Oil prices slipped on Monday, wiping out some of the previous session's gains, as lower growth targets in China and concerns over Russia's compliance with a global deal to cut oil output sparked renewed worries over a crude oil supply glut.
Oil prices slipped on Monday, wiping out some of the previous session’s gains, as lower growth targets in China and concerns over Russia’s compliance with a global deal to cut oil output sparked renewed worries over a crude oil supply glut. The concerns outweighed news of escalating violence in North Africa that sparked questions about oil exports from the region and prompted a small price rebound on Friday.
“It’s a market where there are no signs of extreme tightness,” said Olivier Jakob, managing director of PetroMatrix. “It makes it hard to get a sustained rally.”
Brent crude futures were down 34 cents at $55.56 a barrel by 1036 GMT after settling 1.5 percent higher in the previous session. U.S. West Texas Intermediate (WTI) crude futures fell 31 cents to $53.02 a barrel after closing the previous session up 1.4 percent.
China on Monday lowered its growth target for the year to 6.5 percent, compared with 6.7 percent last year, and also tightened regulatory controls in an effort to tackle pollution.
Investors are watching the moves carefully for signs they could dampen demand for oil.
Meanwhile, figures from Russia’s energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubt on its moves to rein in output as part of a pact with oil producers last year. Commerzank noted that Russia’s production would need to fall by a further 100,000 bpd in March in order to comply with the agreement.
OPEC’s compliance with promised cuts of 1.2 million bpd rose to 94 percent in February, but Saudi Arabia was responsible for the bulk of them, Reuters data showed. Oil brokerage PVM said current OPEC figures left “no room for an annual rebalancing.”
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“Compliance from the 11 member countries needs to improve and the present agreement needs to be prolonged beyond June in order to achieve meaningful drawdown in global oil inventories,” PVM analyst Tamas Varga said. Turmoil in Libya, which was exempt from OPEC’s cut deal, underpinned prices.
Late last week, the eastern-based Libyan National Army (LNA) and allied forces retreated from Es Sider and Ras Lanuf, two of Libya’s largest export terminals, as a faction known as the Benghazi Defence Brigades (BDB) attacked. The terminals had only just reopened in September, enabling production to rise to roughly 700,000 bpd.