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(Bloomberg) — Oil declined after rallying almost 10% over the past two weeks, with technical indicators suggesting recent gains may have been overdone.

West Texas Intermediate fell below $87 a barrel after a 2.3% advance last week. Technical gauges including the relative strength index suggest futures remain overbought. Oil has surged by almost $20 a barrel since mid-June on production cuts from Saudi Arabia and Russia, which have now been extended through the end of the year.

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“Indicators are signaling overbought conditions,” said Han Zhong Liang, investment strategist at Standard Chartered Plc in Singapore, pointing to the RSI, stochastic oscillators and Bollinger bands. “Put together, we believe a consolidation is likely.” 

There were some further bullish signals over the weekend. China’s deflationary pressures eased slightly in August as consumer prices rose, a positive sign for the world’s biggest oil importer. Financial markets are also pricing in lowered odds of a recession in the US. 

OPEC+ leaders Saudi Arabia and Russia last week extended their supply curtailments. The 1 million barrel-a-day reductions the Saudis initially pledged for July will now be in place until year-end, alongside a smaller export cut from Russia.

Widely watched timespreads continue to signal tightness. Despite having eased slightly over recent sessions, the gap between global benchmark Brent’s two nearest contracts remains firmly in a bullish backwardation structure — when later-dated contracts trade at a discount to nearer ones.

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