Global oil prices slumped lower Monday, pulling U.S. crude prices below the $70 mark, after OPEC members agreed to pare their current production cuts and investors re-set assumptions for energy demand amid the ongoing surge in Delta-variant coronavirus infections.
OPEC members, as well as non-cartel allies such as Russia, agreed Sunday to release an extra 400,000 barrels per day into the market, starting in August, until their entire output cut of 5.8 million barrels is restored, which will likely be by September of next year.
The cartel also agree to re-set the baseline under which the current agreement -- first reached in 2016 when oil was trading at $30 a barrel -- was made, giving the United Arab Emirates, Russia and Saudi Arabia more room to boost production capacity from May of next year.
WTI crude futures for August delivery, the benchmark for U.S. oil and gas prices, slumped $3.10 lower on the session to trade at $68.72 per barrel following the OPEC agreement.
Brent crude contracts for September delivery, which are more tightly-aligned to global prices, were marked $2.95 cents per barrel lower at $70.64 in early trading in New York.
U.S. crude stockpiles have declining at a record pace, with Energy Department data showing the Strategic Petroleum Reserve's total falling by 1.15 million barrels per day over the past month.
Overall crude supplies fell by 7.9 million barrels last week, the Energy Department said, extending the longest streak of drawdowns since 2018 amid robust industrial demand linked to the re-opening of pandemic hit economies around the world.
That trade could be slowing, however, now that Delta-variant infections are surging in Asia and energy demand is coming into question.
Still, China's crude throughput production rose at a 3.9% pace in June, according to data from the National Bureau of Statistics, to a record high 60.82 million tons, a figure equal to around 14.8 million barrels per day.
"We maintain our price forecasts of US$75/bbl for ICE Brent over the third quarter of 2021 as the output increments are largely in line with our expectations," said ING's head of commodity strategy Warren Patterson. "Healthy demand growth combined with moderate supply increases from OPEC+ will likely remain supportive for the oil market in short term at least."