Oil is set for its first weekly loss in a month after erasing most of the gains stemming from OPEC+’s surprise output cut.

Brent crude has wiped out almost all of the US$7 that it gained after the Organization of Petroleum Exporting Countries and its allies blindsided markets with a pledge to cut production. Global supplies are also showing signs of growth with Russia’s crude exports bouncing back above 3 million barrels a day last week, despite Moscow saying it had lowered output.

Meanwhile, in global fuel markets, gasoline and diesel are slowing at a time when they should be ramping up or peaking. Asian refiners are considering cutting volumes as margins have weakened recently, signaling that refineries didn’t manage to pass on higher costs to consumers.

“It appears that some of the excitement around the OPEC+ cuts has faded, amid light flows,” said Emily Ashford, Executive Director of Energy Research at Standard Chartered.

Technical indicators are also taking their toll on prices. The U.S. benchmark failed to break through its 200-day moving average last week and has been trading lower ever since. The $7 jump in prices after OPEC+ announcement created a so-called chart gap, which then prompted a corrective move to the downside to fill the large break in prices.

In March, oil hit a 15-month low in the aftermath of bank turmoil that shook confidence across all markets.

The combination of the surprise announcement by OPEC+ on production cuts coupled with a reduction in Iraqi flows pushed oil back into the $80-range. Many market watchers are still betting China’s demand rebound, which grew its economy at the fastest pace in a year, putting the country on track to reach its growth goal. 

Prices:

• WTI for June delivery rose 27 cents to $77.64 a barrel at 11:02 a.m. in New York.
• Brent for June settlement increased 23 cents to $81.33 a barrel.