Oil Falls After OPEC+ Signals Plan to Return Barrels to Market

(Bloomberg) — Oil extended losses after OPEC+ set out a plan to restore some suspended production as early as October, despite concerns over the demand outlook and robust supply from outside of the group.

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Production curbs will continue in full in the third quarter and then be gradually phased out over the following 12 months, the Saudi Energy Ministry said on Sunday after OPEC+ met over the weekend. Brent dropped below $81 a barrel, falling for a fourth day, and West Texas Intermediate traded near $77.

Read More: OPEC+ Extends Cuts But Lays Out Plan to Bring Barrels Back

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 the cuts to continue until the end of the year.

“The market had not expected an unwinding of the cuts from October,” said Vandana Hari, founder of Vanda Insights in Singapore. “On the positive side for OPEC+, the agreement should help maintain cohesion. A long term continuation of lopsided cuts would have been a source of friction.”

Oil capped a monthly loss on Friday in part due to persistent concerns around the demand outlook for China, the world’s biggest crude importer. The prompt spread for Brent briefly slipped into a bearish contango structure last week, and fuel markets have been flashing signs of weakness.

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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