Brent slips 3% to trade below $79/bbl as OPEC’s surprise plan to raise output adds to gloom

Oil tumbled after OPEC+ unexpectedly rolled out a plan to restore some production to the market this year, adding to the bearish momentum crude has been experiencing for months.

Global benchmark Brent crude futures slipped as much as 2.9% to dip below $79 a barrel, while West Texas Intermediate fell below $75 a barrel. Both benchmarks are at their lowest prices since February.

OPEC and its allies over the weekend agreed to start rolling back some production cuts starting in October, earlier than many market watchers had expected. The curbs will continue in full in the third quarter, before gradually phasing out over the following 12 months. Analysts had been torn on whether the decision would be bearish for crude, or whether the group would still be able to diligently manage the market.

Oil has dropped over the past two months as geopolitical risks ebbed and demand showed signs of weakening. Evidence of a softening physical market have also arisen, with Brent’s prompt spread narrowing to 14 cents, closely approaching a bearish contango structure that signals ample supplies in the near future.

Goldman Sachs Group Inc. said the OPEC+ decision was bearish, given a recent increase in inventories, but UBS Group AG and RBC Capital Markets LLC expressed confidence the alliance will maintain control of the market. Most analysts had expected OPEC+ to extend the curbs through to the end of the year.The agreement aims to keep supporting oil prices while easing the production restraints that some members — such as the United Arab Emirates — have chafed against as they sought to have their output levels upgraded.Oil capped a monthly loss on Friday, in part due to persistent concerns around demand in China, the world’s biggest crude importer. prices 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.