Oil moved lower on Monday as coronavirus-induced demand fears outweighed Saudi Arabia announcing additional production cuts in an effort to support prices.
West Texas Intermediate, the U.S. benchmark, shed 60 cents, or 2.43%, to settle at $24.14 per barrel. In a volatile session WTI traded as high as $25.58, and as low as $23.67. International benchmark Brent crude fell $1.37, or 4.4%, to settle at $29.60 per barrel.
Beginning on June 1 Saudi Arabia will cut output by an additional 1 million bpd, which combined with the cuts agreed to by OPEC and its oil-producing allies, brings Saudi Arabia's total cut to roughly 4.8 million bpd below its April record production level. Production for June will now be 7.492 million bpd.
Saudi Arabia also said that it would scale back May production "in consent with its customers."
"The Kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets," a statement from the Saudi press agency said.
Following Saudi Arabia's announcement, Kuwait and UAE said they would also implement additional cuts.
Rystad Energy said that with these new cuts, global storage will most likely not reach capacity, which had been a fear in the market. "An extra 1.2 million bpd cut will not re-balance the market, but will surely remove strain from the storage infrastructure and buy time to wait for the demand rebound," said senior oil markets analyst Paola Rodriguez Masiu.
Oil is coming off its second straight positive week as investors have cheered signs that demand recovery is underway amid ongoing production cuts. WTI jumped 25% last week in one of its best weeks in history, while Brent rose 17%.
Still, prices are well below their highs and the path to recovery is far from certain. On Monday oil moved lower on fears of a possible second wave of coronavirus cases after countries thought to be beyond the worst of the virus, including South Korea, reported a jump in infections.