While U.S. shale output came "roaring back" as prices shifted higher earlier this year, the production curbs led by the Organization of Petroleum Exporting Countries should help offset that increase over the next six to nine months, Citi analysts including Ed Morse and Seth Kleinman wrote in an April 17 report.
Eleven non-OPEC countries - Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan - agreed to reduce the oil output. June WTI, the new front-month, was changing hands around $50.74, 3 cents higher than its previous day's close.
Brent futures LCOc1 settled at $51.96 a barrel, down $1.03, or 2 percent at the market's close.
US West Texas Intermediate (WTI) crude oil futures added 23 US cents, or 0.5 per cent, by 0037 GMT, but were still below the US$50 mark pierced on Friday at US$49.85 a barrel. While a number of exporters have reached an initial deal to extend the curbs past June, according to Saudi Arabian Oil Minister Khalid Al-Falih, data showing rising USA output is raising concern that those cuts will be undermined.
Goldman Sachs Group Inc said there's no fundamental evidence to justify this week's selloff in oil prices. Total volume traded was about 36 percent below the 100-day average.
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The Brent physical oil market is flashing signs of weakness again as dwindling Asian purchases, an influx of American crude to Europe, and supplies flowing out of storage all combine to recreate a glut in the North Sea. If it continues its output cap, USA shale producers will fill the void. OPEC ministers plus their non-OPEC counterparts are scheduled to meet on May 25.
"It all comes down to whether Opec can deliver inventory cuts", Bill O'Grady, chief market strategist at Confluence Investment Management in St Louis, said by telephone.
Separately, however, Novak said that crude oil output in Russian Federation should hit a record-high 549 million tons (about 4 billion barrels) this year, despite the cut. OPEC, under Saudi leadership, appears determined to see through its efforts to drain global inventories back to five-year average levels, but it is also keeping a wary eye on the impact of higher crude prices on the USA shale patch. US output has jumped nearly 10 per cent since mid-2016 to 9.25 million bpd, close to that of the world's top two producers, Saudi Arabia and Russian Federation.
But "until the trend, and specifically the pace of rising USA production, slows or reverses, it will be very hard for oil prices to sustain any material gains in the medium term", said Tyler Richey, co-editor of the Sevens Report.
For Russia specifically, a drop in oil prices could also prove to be politically costly, suggesting it is likely keen to see the cuts extended, according to Croft.
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