Oil Pushes Lower as OPEC+ Plan Spurs Concerns About Ample Supply

(Bloomberg) -- Oil extended losses from the lowest settlement in almost four months after OPEC+’s plan to return barrels to the market earlier than expected raised concerns about oversupply.

Brent fell below $78 a barrel after the August contract tumbled 3.4% on Monday. West Texas Intermediate was under $74. The alliance is scheduled to start unwinding output cuts as early as October, despite persistent concerns around the demand outlook and robust supply from outside of the group.

Some market watchers had expected OPEC+ to extend cuts through to the end of the year, and reaction to the deal was mixed, including doubts about whether the group really will be able to ramp up production as rival supply surges. Key alliance members have pumped above their assigned quotas recently.

The unwinding of cuts “will leave the market in a small surplus next year,” said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, OPEC+ made it clear that the return of barrels can be paused if market conditions do not allow for additional supply, he added.

Oil prices have trended lower since early April as geopolitical risks ebbed and demand showed signs of faltering, leading to some refiners cutting operating rates. The prompt spread for Brent has narrowed toward a bearish contango structure, signaling ample near-term supplies.

Crude’s recent string of declines has pushed prices into oversold territory, based on the 14-day relative strength index. It’s the first time that Brent has breached the threshold since May 2023.

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