Oil futures declined in tandem with equity markets as traders anticipated Sunday’s OPEC+ meeting. After the U.S. holiday on Monday, oil prices fluctuated within a $3 range amid low trading volumes. West Texas Intermediate settled near $77 a barrel, influenced by broader market risk-off sentiment due to a lack of significant catalysts.
Market participants are now focusing on OPEC+ as the group continues informal talks to finalize an agreement on oil output cuts this weekend. In the U.S., signs of market weakness are evident as crude oil inventories accumulate on the Gulf Coast, presenting a challenge for the cartel as it aims to manage global supplies.
Saudi Arabia and its allies are discussing the possibility of extending approximately 2 million barrels per day of production cuts into the second half of the year, with considerations to prolong some restrictions into 2025, according to insiders.
Despite the erratic trading week, oil futures marked a second consecutive monthly decline. This decrease is attributed to the diminishing geopolitical risk premium that has been factored into oil prices since October, along with signs of a weakening physical market and subdued summer demand.
The prompt timespread for Brent futures has shifted into a bearish contango structure for the first time since January. Although this move into contango suggests a softening market, it is expected to be temporary, as the July contract expires on Friday. The spread between August and September contracts, currently in backwardation, has also narrowed.
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