Oil declined amid a stronger dollar and after OPEC+ signaled it may revive output soon. Futures in New York slid as much as 2.2% on Thursday with a rising U.S. dollar reducing the appeal of commodities priced in the currency. Traders are watching to see whether the OPEC+ alliance sets a date to formalize a deal to hike production after delegates said Wednesday the United Arab Emirates made significant progress in resolving its standoff with Saudi Arabia. In the U.S., an inventory report this week showing expanding fuel supplies and crude production also weighed on prices. From a purely fundamental perspective, an expected increase in OPEC+ supply is bearish for crude oil, said Ryan Fitzmaurice, commodities strategist at Rabobank.

Crude has rallied nearly 50% this year as economies across the globe reopen and demand returns. Citigroup Inc. said the oil market is expected to be tight in the near-term and should push Brent prices into the mid-$80s, despite any compromise supply deal between the UAE and OPEC+. The Organization of Petroleum Exporting Countries published its first detailed assessment of 2022, in which it forecast that global oil demand will steadily recover to surpass pre-pandemic levels in the second half of next year. However, it also pointed to a lull in the first quarter.

WTI’s prompt time spread has fallen to about half of levels seen at the beginning of July as U.S. government data shows domestic crude production is rising. The spread’s backwardation — indicating tighter supplies — is fading with output currently at the highest since May 2020. Currently, the August U.S. oil futures is trading at the smallest premium to the September contract in four weeks.

Meanwhile, Saudi Arabia and the UAE appear to be closing in on an agreement to revise Abu Dhabi’s production quota, it would still need to be ratified by the whole group before they can salvage plans to revive halted supply. Goldman Sachs Group Inc. said an accord would be a “bullish catalyst”, and would help remove the low risk of a potential price war. The two sides haven’t fully resolved their differences and talks are ongoing. There are signs other members of the alliance have been inspired to air their own grievances, with Iraq now seeking a higher baseline for its cuts too. That said, “the alliance needs to maintain supply management and discipline through next year” if it wants to avoid a potential glut, JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note.