The agreement has elevated the price of crude to more than $50/bbl, but it helped USA shale oil producers boost their output, hampering efforts to reduce global stockpiles.
May West Texas Intermediate crude CLK7, -1.40% fell 44 cents, or 0.9%, to $47.53 a barrel, while May Brent crude LCOK7, -1.08% eased 33 cents, or 0.7%, to $50.47 a barrel.
The deal reached by Opec at the end of November and followed by commitments from 11 non-Opec members, led by Russian Federation, pledged total cuts of about 1.8 million barrels per day from last October’s levels to speed along a reduction in world inventories which had depressed prices for more than two years.
Goldman Sachs on Sunday said an extension of the joint Opec and non-Opec oil production cut is not warranted unless supply and demand fundamentals deteriorate.
Over the weekend, oil ministers from OPEC and non-OPEC nations that have participated in the deal agreed to consider an extension.
Earlier this month Saudi Energy Minister Khalid Al-Falih told Bloomberg Television that OPEC would extend the deal beyond June if stockpiles were “still above the five-year average”.
Meanwhile, Baker Hughes reported that U.S. drillers added oil rigs for the tenth consecutive week. As the summer picks up can the non-Opec countries, which have been slow on the delivery of cuts, be expected to keep faith and lower production?
If the cartel doesn’t extend the deal, the glut may not clear soon, further depressing oil prices and straining the already stretched OPEC producers’ budgets. The level of OPEC output is 32.5 million barrels per day, with the aim of supporting prices, which have declined due to the surplus of crude at global markets.
Such countries as Oman, Venezuela and Iraq expressed support for the extension of the oil output cut deal during the meeting in Kuwait.
Oil last week slid to the lowest since November as record US stockpiles and increasing American output as well as drilling activity weighed on prices while the Organization of Petroleum Exporting Countries and other nations try to ease a global glut.
Oil inventories are high because of low U.S. demand and higher supply, and the market should re-balance in the second half of the year, OPEC secretary-general Mohammad Barkindo told reporters in Kuwait.
The JMMC called on all countries, participating in the oil output cut agreement, to press toward a 100-percent conformity. The benchmark grade has dropped 11 per cent in 2017 and reached a low for the year of US$49.71 a barrel on March 22.
Kuwaiti Oil Minister Essam al-Marzouq is hoping that a decision would come by the end of April.