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Oil Holds Losses as Saudis Call Time on Additional Output Cuts

SP Futures according to Bloomberg (June 9, 2020) - Oil held declines in Asia after top producer Saudi Arabia said that it would end its extra voluntary production cuts after June.

Futures in New York were little changed, after slipping 3.4% on Monday. OPEC and its allies agreed over the weekend to extend agreed output curbs by another month, but with the news already priced in, traders soon switched their focus to Saudi Energy Minister Prince Abdulaziz bin Salman’s announcement that the kingdom’s additional cuts would cease.

U.S. crude on Monday traded above $40 a barrel for the first time since early March, as the market reacted positively to the extension, before selling off later in the session.

The OPEC+ agreement calls for laggards such as Iraq to cut by levels above and beyond their agreed production number to compensate for falling short previously. However, analysts expressed doubt that would happen, noting that Iraq would have to cut 80% above their quota agreement to compensate.

Saudi Arabia increased prices for some crude exports by the most in at least two decades, according to a pricing list from state oil company Aramco (SE:2222) on Sunday. The increases erase almost all of the discounts the kingdom made during its price war with Russia earlier this year.

Still, the outlook for demand remains uncertain. Goldman Sachs Group Inc (NYSE:GS). turned bearish in the short-term on oil due to poor returns from refining. The OPEC+ alliance’s pact is already more than priced in, and consumption forecasts are “running ahead of a more gradual and still highly uncertain recovery,” according to the bank.

Libya is to export crude produced at two of its largest oilfields again after they had been halted for five months, as the North African country’s conflict-ravaged output limps toward a revival.