Oil falls on easing fears of Opec+ output cut

Oil prices fell on Wednesday, taking a breather from a near 4percent surge the previous day, on receding fears of an imminent output cut by the Organisation of the Petroleum Exporting Countries and allies, a group known as Opec+. Both contracts soared on Tuesday after the energy minister of de facto Opec leader Saudi Arabia flagged the possibility of supply cuts to balance a market it described as “schizophrenic”, with the paper and physical markets becoming increasingly disconnected.

“While Abdulaziz bin Salman’s comment may have achieved more than putting a floor under crude prices, we expect it to follow the law of diminishing returns, unless it is followed up by more signals or action from Opec+ to restrain output,” said Vandana Hari, founder of oil market analysis provider Vanda Insights. With Opec+ already delivering about 2.8- million barrels- per- day less than its monthly target, the maths of cutting production is going to be more complicated than usual, not to mention the politics of it, Hari added. Potential Opec+ production cuts may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West, nine Opec sources told Reuters on Tuesday.