US crude on Monday traded above $40 a barrel for the first time since early March, as the market reacted positively to the extension, before selling off later in the session.
On Monday, the WTI futures reached the lower half of 40 dollars a barrel in NY.
On Saturday, OPEC+ agreed to extend the deal to withdraw nearly 10 per cent of global supplies from the market by a third month to end-July.
Crude oil prices were up on Monday as the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed on Saturday to extend their current crude production cut agreement for an additional month. "Each country has to adhere to its commitment to restrain production along the agreed guidelines", Prince Abdulaziz bin Salman said during a virtual meeting of ministers.
As for the OPEC+ pact, de facto OPEC leader Saudi Arabia has called on participants to ensure they comply with their promised cuts.
Therefore, any change in the price of crude oil would tend to impact the wholesale inflation number in proportion, the Care Ratings report added.
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"When you have Brent approaching $40, it is a good sign", one OPEC delegate said. A political deadlock in the country has further complicated production cuts.
Putting additional pressure on black gold was ramp-up in output from U.S. shale producers, refusal by Mexico to adhere to production and easing supply concerns relating to Libya amid peace talks, undercut the optimism.
In the USA, the oil rig count has declined for the twelfth consecutive week, according to the latest data released by oilfield services company Baker Hughes on Saturday.
In the U.S. Gulf of Mexico, offshore drillers idled about a third of oil production, amounting to about 636,000 barrels of daily output, due to Tropical Storm Cristobal, according to the Bureau of Safety and Environmental Enforcement. One of the reasons for Monday's price drop was the news that Libya has restarted production at its largest oil field (El Sharara).
"The resumption of output ... may moderate the pace of rebalancing of the oil market".
"The issue of compliance is a major fault line in OPEC+ now", said Vandana Hari, founder of energy consultancy Vanda Insights in Singapore.