Oil futures fell sharply on Monday after a three-day weekend, and the weakness was attributed to concerns over the decision by the Organization of the Petroleum Exporting Countries and its allies to ease production restrictions, along with signs that more supply from Iran is hitting the market. West Texas Intermediate crude for May delivery CL.1, -1.32% CLK21, -1.32% fell $ 1.51, or 2.5%, to $ 59.94 a barrel on the New York Mercantile Exchange. June Brent BRN00 crude, -1.36% BRNM21, -1.36%, the world benchmark, was down $ 1.57, or 2.4%, to $ 63.29 a barrel on ICE Futures Europe.
Crude rallied 3% on Thursday after OPEC + said it had agreed to allow oil production to rise by 350,000 barrels in May, 350,000 barrels in June and 441,000 barrels in July, with Saudi Arabia gradually backing off a voluntary cut. of 1 million barrels per day. which had been in effect since January. The rally left WTI up 0.8% for the week, while Brent was up 0.7%. Oil futures were closed for the Good Friday holiday. Analysts said rising production combined with concerns about demand for Chinese imports may be factors in Monday’s weakness. The Financial Times reported on Sunday that the People’s Bank of China had instructed domestic and foreign lenders to keep first-quarter loan growth at roughly the same level as last year, if not lower. “This is not great news as the commodity cycle is lengthening in the tooth and oil prices could be reacting adversely to this momentum,” said Stephen Innes, Axi’s chief global markets strategist, at a note. Meanwhile, analysts pointed to signs of an increase in Iranian crude shipments despite US sanctions, and a Reuters survey indicated that Iranian supplies increased by 210,000 barrels per day to an average of 2.3 million barrels a day. barrels per day in March. Furthermore, that comes as the United States and Iran prepare for indirect talks aimed at the possible restoration of the nuclear deal. “If this happens, it also increases the possibility that we will eventually see the lifting of US sanctions against Iran, allowing further growth of Iranian oil exports,” said Warren Patterson, head of commodity strategy at ING, in a note . “However, on our balance sheet we are already allowing further increases in Iranian supply and assuming 3 million barrels per day of supply by the time we get to 4Q21,” he said. “Despite this increase, our balance sheet continues to suggest a reduction in inventories.”