Oil Futures Slip on OPEC+ Uncertainty

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange turned lower Monday. West Texas Intermediate settled down 1.2%, pressured by concerns of additional tariffs on China. Markets also are gripped with uncertainty over an extension of a production agreement by the Organization of the Petroleum Exporting Countries and Russia.

Oil futures shifted lower Monday as Saudi Arabia and Russia discuss the strategy on oil output for the next six months at St. Petersburg International Economic Forum. Saudi Energy Minister Khalid al-Falih said on Monday that Russia was the only member of the OPEC+ agreement that remains undecided over its participation in the supply accord beyond month's end.

"Almost every member of the 24-country coalition is on board with a rollover of the agreement, except for Russia. There is a debate obviously within the country about the exact volume Russia should be producing in the second half," said Falih said in an interview with Tass News.

Russia sees many uncertainties in the oil market and cannot commit to further production cuts, according to the Russian energy minister. Alexander Novak added he cannot rule out the possibility of oil plunging to $30 bbl if the OPEC+ deal is not extended.

Russian officials were long vocal about the lost market share to U.S. shale producers that are not part of OPEC+ deal, as Russia curtailed output. U.S. production reached a record high level of 12.4 million bpd in the last week of May, with the United States in the top spot among oil producing nations.

On Monday, Argus reported OPEC's output fell 370,000 bpd to 29.77 million bpd in May, the lowest since March 2014. Saudi production plunged to 9.65 million bpd last month, nearly 650,000 bpd below its 10.3 million bpd target, the lowest in five years.

OPEC+ is scheduled to meet on June 25-26 in Vienna to further debate the policy on managing supplies for the second half of the year. Novak said the group may delay its gathering until after the G20 summit in Japan on June 28-29, potentially in the hope that a possible meeting between U.S. President Donald Trump and Chinese President Xi Jinping would shed greater light on the outlook for U.S.-China trade.

Oil markets continue to be rattled by fears of an escalation in the U.S.-China trade war and a potential global economic slowdown. Trump threatened Monday to impose tariffs on an additional $300 billion in Chinese imports if China's Xi does not meet him at G20 Summit in Tokyo at the end of this month. Additional tariffs would add to already existing levies on roughly $200 billion in China's products and around $60 billion in retaliatory tariffs on U.S. imports. The International Monetary Fund said this weekend the U.S.-China trade war represents the biggest risk for the global economy, while retaliatory duties from China could reduce global gross domestic product by $455 billion.

WTI was boosted earlier in the session by news the United States reached an immigration deal with Mexico, easing investor concerns over looming tariffs on the southern neighbor. Trump on Friday said his administration suspended "indefinitely" a planned 5% increase in tariffs on Mexican products, while leaving an option of reverting to its original position if Mexico does not comply with the terms of an agreement.

NYMEX July WTI futures settled $0.73 down at $53.26 bbl, with ICE August Brent moving $1 lower to finish Monday session at $62.29 bbl. NYMEX July RBOB futures dipped $0.86 gallon to $1.7303, while the July ULSD contract ended down 1.85cts to settle at $1.8063 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com