Oil futures dropped alongside equity markets as traders look ahead to Sunday’s OPEC+ meeting.

Following the U.S. holiday on Monday, oil spent the week swinging in a three dollar directionless trade amid muted volumes. West Texas Intermediate fell to settle near US$77 a barrel as a lack of fundamental catalysts meant that crude was swayed by broader risk-off sentiment.

Traders have turned their attention to OPEC+ as the cartel presses on with informal talks aimed at finalizing an agreement on oil-output cuts this weekend. Yet in the U.S., the market is flashing signs of weakness as crude cargoes pile up on the Gulf Coast. That glut highlights a key challenge the group faces as it seeks to rein in global supplies. 

Saudi Arabia and its partners are discussing whether to prolong roughly two million barrels a day of production curbs into the second half of the year. They’re also considering the possibility of extending some restraints into 2025, according to delegates.

Despite the meandering weekly trade, futures capped a second straight monthly decline. The drop is largely due to dwindling geopolitical risk premium that was baked into crude prices since October. Additionally, there have been signs of a weakening physical market and lackluster summer demand. 

The prompt timespread for Brent futures is now in a bearish contango structure for the first time since January. It’s worth noting that while Brent’s move into contango is another indication of a softening market, the shift is likely to be brief with the July contract expiring Friday. That said, the spread for August against September, currently in backwardation, has narrowed.

Prices:

• WTI for July delivery slipped 1.2 per cent to settle at $76.99 in New York.
• Brent for August settlement edged 0.9 per cent lower to settle at $81.11 a barrel
• July futures, which expired Friday, dropped 0.3 per cent to $81.62 a barrel