Oil fell on Monday as markets weighed Saudi Arabia’s warning that the Organization of the Petroleum Exporting Countries and Allies (OPEC+) might cut output against the prospect of a nuclear deal that would allow sanctioned Iranian oil back into the market.
Brent crude futures settled at $96.48 per barrel, down 24 cents or 0.25 percent from the previous day, while West Texas Intermediate (WTI) crude fell 54 cents or 0.6% to $90.23.
Saudi Energy Minister Prince Abdulaziz bin Salman stated that OPEC+ has the commitment, flexibility, and resources to deal with challenges and provide guidance, including production cuts at any time and in various forms.
He stated that the group is prepared to reduce output to correct a recent oil price decline caused by poor futures market liquidity and macroeconomic fears that have overlooked extremely tight physical crude supply.
OPEC+ agreed to increase output by 648,000 barrels per day each in July and August as they fully unwind nearly 10 million barrels per day of cuts implemented in May 2020 to counter the COVID-19 pandemic.
The group agreed earlier this month to raise production quotas by another 100,000 barrels per day in September as it faced pressure from major consumers, including the US keen to cool prices.
Only Saudi Arabia and the United Arab Emirates are believed to have spare capacity and the ability to increase production meaningfully.
Meanwhile, the leaders of the United States, Britain, France, and Germany discussed efforts to revive the 2015 Iran nuclear deal, the White House said on Sunday, which could allow sanctioned Iranian oil to return to global markets.
Also, the US Federal Reserve is expected to raise rates by 50 basis points in September amid expectations inflation has peaked and growing recession worries in the world’s largest oil-consuming nation.
Also pressuring prices were worries over slowing fuel demand in China, the world’s largest oil importer, partly because of a power crunch in the southwest.
The world’s largest importer cut its benchmark lending rate on Monday as part of measures to revive an economy affected by a property crisis and a resurgence of COVID-19 cases.
The Dollar index rose to a five-week high on Monday. A stronger greenback is generally bearish, making it more expensive for buyers with other currencies in the dollar-denominated oil market.
