RPT-UPDATE 7-Brent crude benchmark drops about 2% despite historic output cut

(Repeats story, no change to text)
* OPEC+ agrees deal to reduce output by 9.7 mln bpd -sources
* Cuts equal to about 10% of global supply, but demand falls
more
* Brent six-month contango steeper than before deal
* Citi and Morgan Stanley raise second-half Brent price
forecasts

By Shadia Nasralla
LONDON, April 13 (Reuters) - Benchmark Brent oil prices
turned negative on Monday, erasing gains made after major
producers agreed record global output cuts, pressured by
concerns that the cuts will not be sufficient to reduce a glut
as the coronavirus pandemic hammers demand.
After four days of wrangling, the OPEC+ group of oil
producers, comprising the Organization of the Petroleum
Exporting Countries, Russia and other countries, agreed to cut
output by 9.7 million barrels per day (bpd) in May and June,
representing about 10% of global supply. Brent crude LCOc1 futures were down 60 cents, or 1.9%, at
$30.88 a barrel by 0931 GMT after opening at a session high of
$33.99. U.S. West Texas Intermediate (WTI) crude CLc1 futures
fell 4 cents, or 0.01%, to $22.75 but was oscillating in and out
of positive territory.
U.S. President Donald Trump praised the oil supply deal,
saying it would save jobs in the U.S. energy industry.
Saudi Arabia, Kuwait and the United Arab Emirates
volunteered to make cuts even deeper than those agreed, which
would effectively bring down OPEC+ supply by 12.5 million bpd
from current levels, the Saudi energy minister said.
Saudi Arabia on Monday set its May official selling pricing
(OSP) for crude, selling oil to Asia more cheaply and keeping
prices flat for Europe while raising them for the United States.
Meanwhile, analysts cast doubts on producers' likely
compliance with the production cuts.
Even at full compliance, demand weakness concerns capped oil
price gains. Worldwide fuel consumption is down roughly 30%
because of the COVID-19 pandemic that has killed more than
100,000 people worldwide and kept entire nations on lockdown.
"We expect the OPEC+ decision at best to establish a floor
under the market," said Harry Tchilinguirian of BNP Paribas,
adding that oil price gains could also be capped by producer
hedging.
"We do not expect a sustained recovery in the oil price
until pent-up demand is released in Q3."
The deal had been delayed since Thursday after Mexico balked
at the cuts it was asked to make. The OPEC+ group met on Sunday,
resulting in a cut four times deeper than the previous record
reduction in 2008.
OPEC+ has also said it wants producers outside the group -
such as the United States, Canada, Brazil and Norway - to cut a
further 5 million bpd.
Canada and Norway signalled a willingness to cut. The United
States, where antitrust legislation makes it hard to act in
tandem with groups such as OPEC, has said that low prices mean
its output would already fall by as much as 2 million bpd this
year without planned cuts.
Brent's contango - the market structure in which later-dated
prices are higher than prompt supplies LCOc1-LCOc7 - widened,
highlighting some optimism over the longer-term impact of the
OPEC+ cuts but also current oversupply concerns.
"The fundamentals still look incredibly bearish for the
weeks and months ahead and imply time-spreads should fall into
deeper contango from current levels," FGE analysts said.
Citi analysts raised their Brent price forecasts for the
third and fourth quarters to $35 and $45 a barrel respectively.
Morgan Stanley has also raised its forecasts by $5 for the
second half of the year to between $30 and $35 a barrel.