Oil drops 4 percent after OPEC keeps output steady

PERTH (Reuters) – Oil slumped 4 percent to $44 a barrel on Monday as traders questioned whether OPEC’s decision to enforce better compliance with previous curbs rather than make new production cuts was enough to offset eroding global demand.

While top producer Saudi Arabia had signaled a week ago that it wanted stricter adherence to the cartel’s previous 4.2 million barrel per day (bpd) cuts rather than additional formal restraints, other members had campaigned for explicit action now to avert a further rise in already swollen oil inventories.


At its meeting on Sunday in Vienna, OPEC agreed to enforce existing curbs more strictly and said it would meet again at the end of May to review progress, surprising some traders who had expected the group’s more hawkish members to prevail.

“Oil prices are being dragged down after OPEC surprised the market by leaving output targets unchanged … Pent-up expectations of a production cut into the meeting are naturally being unwound,” research firm Informa Global Markets said in a report.

Reuters