WASHINGTON (DTN) -- Oil futures nearest delivery on New York Mercantile Exchange and Brent crude on Intercontinental Exchange moved mixed in overnight trade, with West Texas Intermediate falling towards $37 per barrel (bbl) and Brent hovering near $40 bbl after the U.S. economy was officially declared to have fallen into recession during the first quarter, denting hopes for a swift recovery in fuel demand, while investors assess whether an agreement by OPEC+ to deepen production cuts in July are enough to sustain the recent price rally.
In early trading, NYMEX West Texas Intermediate July futures dropped back $0.49 to trade near $37.72 bbl, reversing lower from Monday's $40.44 bbl three-month spot high. Brent crude for August delivery slid $0.50 towards $40.20 bbl. NYMEX RBOB July futures firmed to $1.1985 gallon, and ULSD July futures traded higher at $1.1292 gallon.
Oil futures faded from fresh highs after retracing most of the decline from the start of the sell-off in March, as a one-month extension in deeper OPEC+ output cuts of 9.7 million barrels per day (bpd) encountered the prospect of more oil from Libya and increased production in the United States.
Libya resumed oil production over the weekend at two of its largest oilfields, El-Feel and Sharara, after General Khalifa Haftar declared a unilateral ceasefire over the weekend after suffering losses to United Nations' backed forces supporting the government in Tripoli. Output at the fields was last halted in January, with Libya previously producing 1.2 million bpd. The situation remains fluid.
Saudi Arabia, Kuwait and United Arab Emirates also announced Monday their voluntary extra cuts of 1.18 million bpd above their OPEC+ quota would expire on June 30. Noncompliance with pledged quotas under April 12 agreement remains the main sticking point for a 23-nation club of oil producers, with Nigeria and Iraq missing their quotas in May and June and non-OPEC producer Mexico walking away from the agreement altogether.
It remains unclear whether swift plans to reopen businesses and ease quarantines would immediately translate in pickup in global fuel demand, with international air travel still mothballed and millions having lost their jobs in the United States and elsewhere.
Led by "unprecedented declines in employment and production," National Bureau of Economic Research said Monday the U.S. economy fell into recession in February, ending a 128-month long expansion. Atlanta Federal Reserve now projects gross domestic product contracted as much as 53% in the second quarter after posting a 5% drop in the first three months of the year. U.S. equities look to post solid losses at the market's open, with futures tied to Dow Jones Industrials dropping back 300 points and S&P 500 down 0.95%.
U.S. Federal Reserve begins its two-day policy meeting Tuesday, with a policy update and new economic projections expected to be released on Wednesday, with expectations for the central bank to leave interest rates between 0% and 0.25%.
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