Oil prices fell by more than $1 a barrel on Monday, after the OPEC+ group of producers overcame internal divisions and agreed to boost output, sparking some concerns about a crude surplus as COVID-19 infections continue to rise in many countries.
Brent crude was down $1.08, or 1.5 percent, at $72.51 a barrel by 0220 GMT, after falling by nearly 3 percent last week. U.S. oil was down $1.01 cents, or 1.4 percent, at $70.80 a barrel, having declined by almost 4 percent 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 two and a half 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 new production shares from May 2022.
"Oil prices may continue to gyrate in the coming weeks," Goldman Sachs said 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.
To overcome internal divisions, OPEC+ agreed new production quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.
"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 said in a note.
The group last year cut output by a record 10 million barrels per day (bpd) amid an evaporation in demand that 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.