Oil dropped toward $40 a barrel in New York after the biggest gain in two weeks as investors weighed additional OPEC supply hitting the market against signs of an economic recovery across major economies.
OPEC’s crude output rose last month led by Saudi Arabia ahead of the group and its allies relaxing their historic cuts this month, according to a Bloomberg survey. Oil futures added 1.8% on Monday for a second daily increase, tracking stronger equities after U.S. manufacturing rapidly expanded in July, while euro area factories returned to growth.
The futures curve, however, is showing some weakness, with the three-month timespread for benchmark U.S. crude near the widest contango since May, indicating there are some concerns about oversupply.
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