Picture: 123RF/PAVEL IGNATOV
Picture: 123RF/PAVEL IGNATOV

London — Oil prices fell on Tuesday weighed down by a stronger dollar and oversupply concerns after it was announced that a trio of Gulf producers would end voluntary output cuts.

Brent crude was down 85 US cents, or 2.1% to $39.95 a barrel by 9.12am GMT. West Texas Intermediate (WTI) crude fell 98c, or 2.6% to $37.21 per barrel.

A “slightly stronger US dollar ... is weighing on crude prices. Also the prospect of higher production from Saudi Arabia, Kuwait, UAE and Oman in July is not helping prices as well,” UBS analyst Giovanni Staunovo said.

Oil cartel Opec, Russia and other producers, a grouping known as Opec+, on Saturday agreed to extend record cuts of 9.7-million barrels per day (bpd) until the end of July.

Saudi Arabia, however, later said it, Kuwait and the United Arab Emirates would not extend cuts of 1.18-million bpd they are currently making on top of that Opec+ target.

There are also some concerns that recent signs of improving demand could prompt higher nonOpec supply.

“Healthy price levels can bring unrestricted production back from other countries, such as the US and Canada ... And if production rises there, prices will of course take a hit,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Goldman Sachs raised its 2020 forecast for Brent to $40.40 per barrel and WTI at $36 but warned that prices would be likely to pull back in the coming weeks due to demand uncertainty and inventory overhang.

Prices found some support earlier in the session after Libya's National Oil Corporation told employees to shut its Sharara oilfield just hours after maintenance operations started as an “armed force” had entered the site.

The American Petroleum Institute is scheduled to report inventory data on Tuesday, with US crude and petrol inventories estimated to have fallen by 1.5-million barrels and about 100,000 barrels respectively in the week to June 5, a preliminary Reuters poll showed.

Reuters