By Peter Nurse
Investing.com - Oil markets edged lower Monday, consolidating after recent strong gains despite a group of major oil producers agreeing to extend record production cuts.
At 8:10 AM ET (1210 GMT), U.S. crude futures traded 0.9% lower at $39.20 a barrel. The international benchmark Brent contract fell 0.2% to $42.20.
Over the weekend, the Organization of Petroleum Exporting Countries and its allies agreed to extend massive output cuts by an extra month, with the group’s leaders--mainly Saudi Arabia and Russia--also persuading other group members to fulfill their promises to reduce production.
Oil has doubled since April as OPEC+ cuts trimmed a global glut and demand staged a rebound, with Brent futures posting a sixth weekly increase on Friday, the longest run of gains since May 2018.
Adding to positive news, China’s crude imports soared to an all-time high last month, surging to 47.97 million tons in May, or 11.34 million barrels a day, according to customs data on Sunday. That’s a 15% jump from April and 160,000 barrels a day more than the previous record set in November.
Saudi Aramco (SE:2222) also increased its Arab Light pricing by $6.10 a barrel from June, according to a pricing list seen by Bloomberg, the biggest rise in at least 20 years.
That said, further gains may prove hard to achieve, as witnessed by Monday’s drift lower.
“There is no enforcement mechanism,” said ING, about the weekend’s deal, in a research note to clients, “it is difficult to believe that the likes of Iraq will suddenly start to comply with the deal.”
Additionally, the reopening of two major oilfields in Libya, after a months-long blockade, could offer up more supply.
“The potential return of Libyan output could also cause considerable challenges for the OPEC leadership,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, on CNBC.