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(Bloomberg) -- Oil dropped to the lowest this year after Bloomberg reported that OPEC+ will restart some halted production, a surprise decision that threatens to deepen a projected global surplus of crude.
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West Texas Intermediate slid more than 2% to breach $68 a barrel, and global benchmark Brent fell below $72. The group led by Saudi Arabia and Russia will go ahead with the increase of 138,000 barrels a day in April, a delegate told Bloomberg. The output revival had been postponed three times and follows pressure from US President Donald Trump to lower oil prices.
The move upends widespread expectations that OPEC+ would once again push back the restart amid projections for a supply surplus later this year and a dim outlook for energy demand in both the US and China, the world’s two largest consumers of crude. US President Donald Trump’s threatened trade wars have added to the market’s gloom, damping trading volumes and spurring hedge funds to cut their net-long position in US crude to the lowest since 2010.
The surprise OPEC+ decision also hit shares of US energy producers, which may restrain production into an amply supplied market. The S&P 500 Energy Sector Index tumbled as much as 3%.
“This reinforces the likelihood of US supply undershooting in the year ahead as OPEC takes back market share,” said Jon Byrne, an analyst at Strategas Securities. Still, the added OPEC supply may help backfill any Iranian crude flows that are reduced by additional sanctions from the Trump administration, he added.
Crude had fluctuated earlier in the session as markets awaited clarity on Trump’s plans to impose tariffs on Canada and Mexico — its top foreign oil suppliers — and double a levy on China, moves that may raise the price of US crude and boost costs for refineries.
At the same time, Europe is racing to craft a plan for Ukraine following the clash between Trump and President Volodymyr Zelenskiy on Friday, with the future of sanctions on Russian crude still uncertain.
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