WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell in early trade Monday, with the U.S. crude benchmark retreating towards $60 barrel (bbl) as traders grow cautious ahead of additional oil supplies set to hit the market after Organization of the Petroleum Exporting Countries and Russia-led partners agreed to a gradual increase in production levels by the end of May, with Saudi Arabia phasing out its unilateral output cut and U.S. oil producers increased the number of oil rigs to the highest point since April 2020.
In early trade, NYMEX West Texas Intermediate May futures declined 99 cents to $60.44 bbl and the June Brent contract on ICE fell a steeper $1.12 to below $64 bbl. NYMEX May ULSD futures dropped 2.94 cents to $1.8022 gallon and NYMEX RBOB May futures were down 3.68 cents near $1.9863 gallon.
On April 1, OPEC+ surprised the markets with a decision to boost oil production by 350,000 barrels per day (bpd) in May, and by the same amount again in June. The producers then agreed to further increase output by another 450,000 bpd in July. Saudi Arabia, meanwhile, said it would gradually sunset its unilateral 1 million bpd production cut, with plans to end those curbs altogether by the end of July.
Prior to the meeting, market participants had expected OPEC+ to leave those cuts at the January level as a resurgent number of COVID-19 cases in the European Union and emerging markets were seen undermining a recovery in global oil demand.
The agreement is believed to be a new compromise between Saudi Arabia and Russia, with Moscow pushing the alliance to boost production in the face of a resurgence in U.S. oil output. Last week, U.S. oil rigs jumped 13, the biggest weekly increase since January 2020, lifting the active number of rigs targeting oil to a one-year high 337. Higher oil prices and ongoing demand recovery in the U.S. have clearly incentivized U.S. producers to hike output, with the rig count rising for an eighth month.
On the U.S. economy, most forecasts peg U.S. gross domestic product growth at 6% this year, citing an accelerated pace in daily vaccinations and deeper public spending from the federal government. The U.S. economy added 916,000 jobs last month and the unemployment rate fell to 6% in the strongest indication yet that the labor market is poised to continue a healthy expansion, clawing its way towards pre-pandemic levels as the number of administered vaccinations continues to rise. The employment data, released Friday by the Bureau of Labor Statistics, firmly beat economist predictions of 675,000 positions added.
The United States is now averaging close to three million vaccinations a day, with one-third of all U.S. adults having already received at least one dose and 58 million people now fully vaccinated, according to the Centers for Disease Control and Prevention.
Furthermore, business activity in the manufacturing sector surged to a 37-year high 64.6 in March, according to the data released Monday morning by the Institute of Supply Management. With manufacturing representing about 12% of the U.S. economy, the data bodes well for a much-anticipated rebound.
The International Monetary Fund is expected to raise global economic growth forecasts this week, with the improved outlook triggered by U.S. stimulus and progress in COVID inoculations.
"We now expect a further acceleration: partly because of additional policy support -- including the new fiscal package in the United States -- and partly because of the expected vaccine-powered recovery in many advanced economies later this year," IMF's Managing Director Kristalina Georgieva said during a speech last week.
Liubov Georges can be reached at email@example.com