Global benchmark Brent crude traded above US$85 a barrel, while West Texas Intermediate was near US$81. The announcement by the Opec+ heavyweights on Sunday comes after the fading Israel-Hamas war premium and concerns over weaker global demand pushed oil prices down by more than 6% last week.

Crude surged after the Hamas attack on Israel on Oct 7, but those gains have now been almost entirely unwound as the war has remained contained and not disrupted supplies from the Middle East, the source of around a third of the world’s oil.

While there’s still a chance the conflict could spread across the region, a weakening global economic outlook has now now become the main price driver.

A surprise contraction in Chinese manufacturing last month has raised questions about the recovery in the world’s biggest oil importer, while US stockpiles are growing. Even a falling dollar, which makes oil cheaper for most buyers, hasn’t been enough to arrest the downward slide.

“It will likely be a slow and bumpy recalibration for crude as it discards the risk premium from the Israel-Hamas conflict and recouples with economic sentiment,” said Vandana Hari, founder of Vanda Insights. “The only relative certainty is on the supply side, with Opec+ holding output targets steady until year-end.”

In the Middle East, Israel ramped up its assault on Gaza, entirely encircling Gaza City even as Washington raced to expand its diplomatic efforts. US Secretary of State Antony Blinken, meanwhile, made an unscheduled stop in Baghdad with the goal of preventing the war from spreading, and also met with the Palestinian president in the West Bank.

Saudi Aramco, meanwhile, kept its December official selling prices for two of five oil grades unchanged to Asian customers, while increasing offer levels for a couple of varieties. It left all prices to North America unchanged, while slashing those to Europe, where demand is weakening.