Oil prices fell more than 6 per cent after Opec+ ended weeks of deadlock and agreed on Sunday to boost supply from August.
Brent, the key international oil benchmark, fell below $70 to trade 6.06 per cent lower at $69.13 per barrel at 7.20pm UAE time. West Texas Intermediate was 6.75 per cent lower at $66.96 per barrel.
Opec+ agreed to bring 400,000 barrels per day back to the markets in August and will revise baselines used to calculate quotas from May 2022, following requests by several countries, including the UAE.
Under the latest agreement, the UAE's new production baseline will increase to 3.5 million bpd, from 3.168 million bpd previously. Other producers – including Iraq, Kuwait, Saudi Arabia and Russia – will also see their baselines rise.
"Although the intention to increase production is a short-term negative for oil prices, particularly as it coincides with growth fears sweeping markets this week, in the longer run, the ability of Opec+ once again to overcome their difference is a positive for prices," said Jeffrey Halley, senior market analyst, Asia Pacific at Oanda.
"If demand falls short of expectations, Opec+ more than likely has the discipline to modify production targets to support prices as well now, as necessary," he added
Opec+, led by Saudi Arabia and Russia, extended its agreement until the end of December 2022. The group reached a consensus over the phasing out of 5.8 million bpd of withheld supply following weeks of deadlock and will review the pact at the end of the year.
Saudi Arabia's energy minister, Prince Abdulaziz bin Salman warned about "uncertainty" in the oil markets.
"We're dealing with uncertainty. And if you are dealing with uncertainty, the first thing you need to do is to acquiesce to the concept that you cannot predict uncertainty," he told reporters after the meeting.
In spite of additional expected output from Opec+, global oil demand growth is still set to outpace supply, "resulting in a further drawdown in inventories," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
"The expected tight oil market fundamentals are likely to keep oil prices supported and we see Brent averaging $73 per barrel in 2H2021," she added.
Opec continues to maintain its demand growth forecast for crude at almost 6 million bpd for 2021, leaving the estimate unchanged in its July report for the third consecutive month.
Total global oil demand is set to reach 96.6 million bpd, the group said in its latest monthly market report.
Longer-term, oil prices are likely to continue their rise as mobility restrictions ease and demand for energy rises.
"The slow pace of production growth indicates that producers are comfortable with current oil prices and are likely concerned about the pace of economic recovery as new coronavirus variants emerge," said Naeem Aslam, chief market analyst at AvaTrade.
"Therefore, it is uncertain whether the planned rise in oil supply will hinder a rise in oil prices as demand continues to rise," he added.
Following the Opec+ decision to boost supply, Brent, the benchmark under which two thirds of oil globally trades, is still headed towards $80 per barrel as demand is set to outpace supply, said Giovanni Staunovo, commodity analyst at Swiss bank UBS.