2020.06.0819:19:00UTC+00Crude Oil Futures Settle Sharply Lower

Crude oil prices drifted lower on Monday, weighed down by news about Saudi Arabia's decision to not extend any additional voluntary reduction in crude production.

On Saturday, the OPEC and allies agreed to sustain existing output cuts through end-July. The curbed output represents about 10% of the world's overall crude supply.

Following the group's decision to not extend cuts beyond July, Saudi Arabia sharply raised its monthly crude prices for July and said there will not be additional voluntary reductions.

Saudi Energy Minister Prince Abdulaziz bin Salman said in a news conference on Monday that the kingdom and Gulf allies Kuwait and the United Arab Emirates would not cut output by an extra 1.18 million bpd in July as they are doing in the current month. The voluntary cuts by these countries were in addition to the agreed reduction of 9.7 million barrels a day, according to OPEC+'s plan.

West Texas Intermediate crude oil futures for July ended down $1.36 or about 3.4% at $38.19 a barrel.

Brent crude futures shed $1.30 or about 3.1% at $41.00 a barrel.

Experts said that compliance with the agreement among OPEC members such as errant producers Iraq and Nigeria, which was a sticking point headed into the gathering, will remain an issue going forward.

The potential return of Libyan output is also expected to cause considerable challenges for the OPEC leadership. Libya's biggest oilfield, El-Sharara, is gradually resuming production after a five-month shutdown that shut off most of the country's production.

Production at Saharara will resume at an initial 30,000 barrels per day and take three months to return to full capacity due to damage caused by the shutdown, says a Bloomberg report, citing Libya's state-run National Oil Corp.

Sharara was producing around 300,000 barrels before the cutoff amid an offensive by Khalifa Haftar, who leads a rebel military force based in the country's east.