Oil slumps 5% as rising OPEC+, Iranian output weighs

NEW YORK: Oil fell more than 5% on Monday as rising supply from OPEC+ and higher Iranian output countered signs of a strong economic rebound in the United States and expectations of a wider demand recovery in 2021.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed on Thursday to monthly production hikes from May to July. OPEC member Iran, exempt from making voluntary cuts, is also boosting supply.

Brent crude for June fell $3.07, or 4.73%, to $61.79 a barrel by 11:21 p.m. IST. US West Texas Intermediate crude for May dropped $3.18, or 5.17%, to $58.27.

“The timing was not good,” said Bob Yawger, director of energy futures at Mizuho Securities. “It seemed like OPEC+ was going to roll the deal, but they didn’t and now it looks like they’re going to have to pay at least in the short term.”

Oil has recovered from historic lows last year with the support of record OPEC+ cuts, most of which will remain after July, and some oil demand recovery that is expected to gather pace in the second half.

While a slow vaccine rollout and return to lockdown in parts of Europe have weighed, figures on Friday showed the US economy created the most jobs in seven months in March, with all industries adding jobs.

“The seemingly invincible accelerating US recovery has offset OPEC+’s announcement on Thursday,” Jeffrey Halley of brokerage OANDA said.

In another development that could eventually boost supply, investors are focused on indirect talks between Iran and the United States as part of negotiations to revive the 2015 nuclear deal.

Eurasia analyst Henry Rome said he expected US sanctions, including restrictions on Iranian oil sales, to be lifted only after these talks are completed and Iran returns to compliance.

Iran has already boosted exports to China despite the sanctions.

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