After a short-term positive reaction to the OPEC+ deal on Friday, crude oil prices struggle to show a sustained recovery as the exporters agreed to curb output by 1.2 million barrels a day. Despite a consensus was finally reached, investors refrain from aggressive buying as there are some doubts that all the members of the group will fulfill their obligations honestly. Traders also fear that the agreed cuts won’t be enough to balance the global market.
In other news, Libya’s state oil company NOC declared a shutdown of its biggest oilfield. This could lead to an output loss of over 300,000 barrels per day. Traditionally, supply disruptions have only a short –term effect on crude oil prices, but this coupled with the OPEC+ deal could at least help Brent to remain afloat for the time being.
Meanwhile, the US shale activity remains a downside risk for the market, as well as doubts surrounding the deal between the OPEC exporters and their allies. As such, we don’t see a high probability of prices rising back towards the $70 barrier. However, the overall market picture looks better now. In the short term, Brent needs to firmly get back above $62 to avoid profit-taking.