Oil drop on symbolic OPEC+ production cut

MELBOURNE (Reuters) – Oil prices fell early on Tuesday, paring the previous session’s 3% gain, as an OPEC+ deal to cut production by 100,000 barrels a day in October was seen as a largely symbolic move to stem the recent market slump.

Brent crude futures fell 33 cents, or 0.3%, to $95.44 a barrel at 0054 GMT.

U.S. West Texas Intermediate (WTI) crude futures rose Monday to $89.13 a barrel, and were up $2.26, or 2.6%, from Friday’s close. There was no settlement on Monday, the Labor Day holiday in the United States.

The Organization of the Petroleum Exporting Countries and its Russia-led allies, collectively known as OPEC+, decided to reverse a 100,000 bpd increase for September after top producer Saudi Arabia and other members quit. worried about falling prices since June despite tight supplies.

Analysts, who did not expect the deal even after Saudi Arabia said it wanted to support prices, said the drop was mostly symbolic given OPEC+ was unable to provide support. achieve its production targets.

“The move shows they remain serious about price support, despite the fact that the decline will have little impact on near-term supply and demand dynamics,” analysts at ANZ Research said. in a note.

Further supporting the awards, the European Union’s foreign policy chief said he had less hope of reaching an agreement soon to relaunch a nuclear deal with Iran, which would delay any return by around 1 million bpd of Iranian crude on the market.

Westpac senior economist Justin Smirk said a return of Iranian oil would likely make up for lost production from Russia, so expanded supply is unlikely to change much.

He said OPEC+ should be confident that oil is holding around $90 a barrel.

“You have growth shocks, rate hikes and a strong US dollar and prices haven’t fallen significantly – reflecting a tight market. I don’t see why OPEC would want to change that,” Smirk said. .