(Bloomberg) — Oil’s rally lost steam even after Saudi Arabia said it would slice production by an extra million barrels a day in June as doubts surfaced over whether the producer will fulfill its pledge.Futures in New York and London erased morning gains that followed Saudi Arabia saying it will pump 7.492 million barrels a day next month, about a million barrels below its official OPEC+ output target. That would be the lowest level since mid-2002, according to data compiled by Bloomberg.“While Saudi is undoubtedly the market’s swing supplier, delivering such a volume turnaround in the space of only a couple of months is a tall order,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.The UAE also announced an additional 100,000 barrels per day of cuts for next month. The curtailments have added to the unprecedented output cuts the Organization of Petroleum Exporting Countries and its allies embarked on May 1 in response to the coronavirus pandemic, which has crushed consumption.Still, WTI is holding up better than Brent as the announcement signals “a let up of Saudi crude oil arriving in the U.S.,” said Tchilinguirian.All the while, demand continues to show signs of a fledgling recovery. Indian consumption will be as much as 25% higher in May after falling to its lowest level since 2007 last month. Traffic jams are returning in China and Europe, as easing lockdown measures boost driving, and people avoid public transport, boosting gasoline demand.“If we start to see more news of people going back to work, more cars on the road, then oil markets are going to take their cue from that and prices are going to move higher on the expectation that demand is actually moving up,” said Stewart Glickman, an analyst for CFRA.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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