(Bloomberg) — Oil extended losses after OPEC+ set out a plan to return some barrels to the market this year.
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Brent dropped below $81 a barrel after a three-day decline, and West Texas Intermediate traded near $77. Production cuts will continue in full in the third quarter and then be gradually phased out over the following 12 months, the Saudi Energy Ministry said after OPEC+’s weekend meeting.
The agreement aims to keep supporting oil prices while easing the production restraints against which some members — such as the United Arab Emirates — have chafed as they sought to have their output levels upgraded. Most market watchers had expected curbs to continue until the end of the year.
Oil capped a monthly loss on Friday on mounting concerns over China’s demand outlook and as crude supplies from outside the Organization of the Petroleum Exporting Countries and its allies swell. The prompt spread for Brent briefly slipped into a bearish contango structure last week, and money managers have been trimming bets on rising prices.
Weakness is being reflected in products markets, with the profits for making fuels such as diesel on the decline. Structural factors such as new refineries in the Middle East coming online have helped to depress prices.
Futures are still higher this year after geopolitical tensions from the Middle East to Ukraine raised concerns about supply. Israel has pushed back on a cease-fire plan laid out by US President Joe Biden, as the war in Gaza approaches its eighth month.
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