ASX energy shares will be on watch today on news that OPEC+ has stuck a deal to return oil production to pre-COVID-19 levels.
Oil prices dipped on the news as traders are anticipating extra supply to hit the market from next month. The Brent benchmark slipped 0.4% in early trade to add to the 2.6% drop from last week, reported Bloomberg.
Weaker oil prices to weigh on ASX energy shares
The development will add to jitters for oil-exposed ASX share prices as futures pricing points to a 0.5% fall in the S&P/ASX 200 Index (Index:^AXJO) following negative leads from Wall Street.
Some of the sector's heavyweights include the Woodside Petroleum Limited (ASX: WPL) share price, Santos Ltd (ASX: STO) share price, Oil Search Ltd (ASX: OSH) share price and Beach Energy Ltd (ASX: BPT) share price.
Saudi Arabia and the United Arab Emirates (UAE) have finally overcome differences to reach a new deal on the weekend.
Oil supply to lift as OPEC+ strikes new deal
This paves the way for the Organization of Petroleum Exporting Countries and Russia (called OPEC+) to pump an extra 400,000 barrels of oil a day from August until output from the bloc hits pre-pandemic levels.
OPEC+ is currently withholding 5.8 million barrels a day to support the oil price during the COVID-induced global recession.
The group recently failed to reach a new deal to extend the production curbs after UAE refused to sign up.
The news sent the oil price surging higher as OPEC+ will not be able to lift supply unless all members agree to the new terms.
UAE returns to the OPEC fold
To get the UAE to play ball, OPEC's de facto leader Saudi Arabia agreed to allow the UAE to increase its baseline. The baseline is the benchmark applied to each country by which output cuts are measured.
But the UAE isn't the only OPEC member to get higher baselines. Saudi Arabia, Iraq, Kuwait and Russia also got their baselines lifted.
Experts believe that extra oil supply is needed quickly as demand is recovering with the reopening of the global economy.
ASX energy shares can't shake worries
But the bright demand outlook is being clouded over by fresh outbreaks of the Delta-variant. The more contagious mutation is threatening the reopening of countries like Australia, Singapore and the UK – just to name a few.
Further, oil traders are nervously eyeing Iran since the easing of sanctions against the oil-producing country. Bloomberg reported that first crude exports from Iran are expected in the coming days.
Hang tight fellow Fools! This week could be a particularly volatile time for ASX energy shares.
