NEW YORK: Oil fell 4% a barrel on Monday, as rising output from OPEC+ and the threat of another severe Covid-19 wave countered signs of a strong economic rebound in the United States.
Brent crude for June fell settled at $62.15 a barrel, down $2.71, or 4.2%. US West Texas Intermediate settled at $58.65 a barrel, shedding $2.80, or 4.6%.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, agreed on Thursday to hike production monthly from May to July. OPEC member Iran, exempt from making voluntary cuts, is also boosting supply.
“The timing was not good,” said Bob Yawger, director of energy futures at Mizuho Securities. “It seemed like OPEC+ was going to roll the deal, but they didn’t and now it looks like they’re going to have to pay at least in the short term.”
Oil has recovered from historic lows last year with the support of record OPEC+ cuts, most of which will remain after July.
The global economic outlook has become clouded by another wave of coronavirus infections. Cases have spiked in India, Canada and other nations. France tightened lockdowns to head off the disease’s spread.
The United States saw job growth exceed 900,000 in March, but US caseloads have surged as well, even though it has been among the fastest countries to vaccinate residents.
Investors are also focused on the revival of indirect US talks with Iran as part of negotiations to resurrect the 2015 nuclear deal that limited Iran’s ability to produce nuclear weapons.
Washington officials said they expected the discussions beginning on Tuesday to be difficult. Eurasia analyst Henry Rome said he expected US restrictions on Iranian oil sales to be lifted only after talks are completed and Iran returns to compliance.
Iran has already boosted exports to China despite the sanctions.
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