World oil prices dropped in volatile trade on Tuesday as traders shrugged off news that crude producers agreed to cut production over the weekend, traders said.
Futures had earlier risen after US President Donald Trump indicated Monday that producers were considering cutting 20 million barrels per day — more than double the announced figure.
At about 1100 GMT, European benchmark London Brent North Sea oil for delivery in June dipped 0.4 percent to trade at $31.61 per barrel.
US benchmark West Texas Intermediate crude for May delivery slid 1.7 percent to $22.04.
OPEC producers dominated by Saudi Arabia and allies led by Russia thrashed out a compromise deal on Sunday to cut production by nearly 10 million barrels per day from May.
Heading into the meeting however, prices had already jumped on expectations of a deal being reached to cut output.
Producers had hoped to address the market’s recent collapse, fuelled by the coronavirus sapping global energy demand and a Saudi-Russian price war.
“Oil prices were already at higher levels than they should be before the OPEC+ and the G20 meetings due to market enthusiasm and hopes for a solution to the crisis,” noted Rystad Energy analysts.
“Although OPEC+ decided to reduce output… cuts of such levels are not enough to bring back healthier price levels,” they added in a client note.
The producers’ agreement was aimed at boosting prices after months of heavy falls as nations experience lockdown — shutting factories, grounding planes and ridding roads of cars.
A Saudi-Russian price war has compounded the crisis, with both countries ramping up production as they bid to hold on to market share and undercut US shale producers extracting oil from rock.
Traders remain nervous about a supply glut amid estimates that demand has plunged 25 million barrels per day.
“The historic cut did not spark the market reaction that oil producers were hoping for,” noted Swissquote Bank analyst Ipek Ozkardeskaya.
“Not only that the OPEC+ cut remained a touch below the lower range of expectations, but more importantly, wide controversies among oil producer nations hinted that a further action is probably unlikely.”
Oil producers had been negotiating a deal to cut production and support prices for days.
Mexico had balked at an agreement on Friday, leading Trump to step in and say the US would help its neighbour meet its end of the bargain.
“The OPEC+ deal has received the underwhelming reception it deserves, frankly, with producers delivering right at the bottom end of expectations after days of talks,” said Oanda analyst Craig Erlam.
“It’s no surprise to see oil prices paring back.”
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