The oil price fell roughly 5% despite oil producing nations agreeing to extend production cuts by another nine months.
Some analysts said the move, agreed by OPEC and non-OPEC members, would ultimately support a rising price in the coming months.
“Although the decision to rule out further cuts has caused a temporary fall back in the price, the decision to extend is still welcome news for the sector – a sensible step in the direction of a healthier supply/demand equilibrium,” said Paul Mumford, a fund manager at Cavendish Asset Management.
Nicolas Robin, commodities portfolio manager at Columbia Threadneedle Investments, said the decision to extend the cuts beyond the Russian presidential election next March was significant in that it highlighted Putin’s interest in supporting prices.
“While crude oil inventories have started falling in recent weeks, the magnitude of the draws should now start growing as the refinery turn around season winds up globally,” he said. “Yesterday’s announcement supports our view that oil prices will continue to migrate higher and that the forward curve will invert at the front end as we head into the summer.”
The Organization of the Petroleum Exporting Countries agreed the extension at a meeting in Vienna alongside 11 non-member countries led by Russia.
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