Futures Movers: Oil loses ground as focus shifts from output cuts back to demand hit

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Oil futures lost ground Tuesday, weighed down by a global glut of crude created by the hit to demand from the COVID-19 pandemic and a month-long price war between Saudi Arabia and Russia that was ended over the weekend with an agreement by major producers to cut output.

West Texas Intermediate crude for May delivery CL.1, -2.99% fell 53 cents, or 2.2%, to $21.88 a barrel on the New York Mercantile Exchange, while June Brent crude BRN00, -0.91% was off 19 cents, or 0.8%, at $31.55 a barrel on ICE Europe.

While the cuts agreed to by major producers on Sunday are “substantial, they still fall short of bringing the market to balance over 2Q20,” said Warren Patterson, head of commodities strategy at ING, in a note.

After several days of intense negotiations, members of the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, agreed Sunday to cut overall crude-oil production by 9.7 million barrels a day starting on May 1 through June 30 of this year.

That total cuts would decline to around 8 million barrels a day from July 1 through Dec. 31, followed by a smaller 6 million barrels in cuts from Jan. 1, 2021 to April 30, 2022. Analysts feared lack of a deal could have ended in a collapse of prices on Monday, but some see oil prices still under pressured, given demand has been crushed by coronavirus-driven economic shutdowns.

Oil saw a mixed finish on Monday.

“The stock overhang this quarter should still see prices trading lower from current levels, although the floor for the market is likely somewhat higher than it was prior to the deal. We have therefore revised higher our oil price forecasts,” Patterson said.

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