Oil Prices Fall More than 1% Despite OPEC+ Decision to Increase Oil Supply

Brent crude was down $1.08, or 1.5%, at $72.51 a barrel by 0220 GMT, after falling nearly 3% last week.

U.S. oil was down $1.01 cents, or 1.4%, at $70.80 a barrel, having declined almost 4% last week.

OPEC+ ministers agreed on Sunday to increase oil supply from August to cool prices that earlier this month climbed to the highest in around 2-1/2 years as the global economy recovers from the COVID-19 pandemic.

The group, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, agreed on new production shares from May 2022.

“Oil prices may continue to gyrate in the coming weeks.”Goldman Sachs after the agreement.

However, the U.S. investment bank said it remained bullish on the outlook for oil and the agreement was in line with its view that producers should focus on maintaining a tight physical market all the while guiding for higher future capacity and disincentivizing competing investments.

It said the OPEC+ deal represented $2 “upside” to its summer forecast for Brent to reach $80 a barrel and $5 upside on its outlook for the international benchmark to average $75 a barrel next year.

“This agreement should give market participants comfort that the group is not headed for a messy breakup and will not be opening up the production floodgates anytime soon,” RBC Capital Markets.

The group last year cut output by a record 10 million barrels per day (BPD) amid evaporation in demand the pandemic developed, prompting a collapse in prices with U.S. oil at one point falling in negative territory.

It has gradually brought back some supply, leaving it with a reduction of around 5.8 million BPD.