Vessels pass an oil refinery in the waters off the southern coast of Singapore. Deflecting the questions was easy; it is understandable that before deciding on an extension, OPEC wants to evaluate its own ability and that of its non-OPEC collaborators to adhere to production curbs, as well as gauge the impact on inventories and prices from the first six months of cuts.
Oil prices also fell on Monday after reports indicated that OPEC did not cut production as much as originally promised and that USA drilling continued to increase.
The brief surge repeats a pattern that has emerged in the last 10 days after a market rout that saw big speculators exit bullish positions on persistently high inventory figures.
"I think oil is reacting still to the steady rise in the USA rig count and the realization that momentum is building to the downside from the repositioning of speculative interests in the market", said John Kilduff, partner at Again Capital in NY. The global benchmark crude closed at a US$2.71 premium to May WTI, the widest since January.
"Cuts are not enough to re-absorb the world's excess supply".
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Not only are supplies from the Middle East and Russian Federation to Asia still high despite the pledge to cut, but record volumes are flooding into Asia from the Americas and Europe.
Oil prices were also hit by information from Libya, which is exempt from the cartel's deal due to fighting in the country. Crude for delivery in January 2018 is only 70 cents more expensive than that for delivery next May, making those floating storage vessels unprofitable. If market balancing indeed has to start, we need to see a sustained drawdown in oil stockpiles.
Greg McKenna, chief market strategist at brokerage AxiTrader, said the fall in crude oil prices could be attributed to "the cracks in the Opec/non-Opec deal" with U.S. shale oil back as the new swing player in production.
Money managers cut bets on rising West Texas Intermediate crude by a record amount during the week ended March 14, while wagers on a further price drop doubled as oil remained below $50 a barrel. Shell, Total and Eni have already purchased 2 million barrels of crude oil from Iran.
"The uptick in arbitrage has not gone unnoticed by the large Middle Eastern (Opec) producers", analysts from consultancy JBC Energy said in a note to clients last week. So far, Saudi has been lifting the weight of OPEC countries that have cut less than they committed, which boosts the bloc's aggregated compliance. However, sellers came in and have pushed the price back lower. Also, two years of disagreements between the oil producers threw the deal into doubt.