After hitting $40/bbl overnight for the first time in three months, crude prices reversed sharply following a Bloomberg report OPEC+ and its allies are having trouble in striking a deal this week to extend their historic output cuts because "Saudi Arabia and Russia drew a hard line over quota cheating by some nations."

The two leaders of OPEC+ reportedly told several cartel members ahead of the meeting on Thursday when a production cut extension was expected to be discussed, that record output cuts may not be feasible if Iraq and Nigeria don't make firm commitments to curtail supply. 

The group is expected to discuss extending production cuts by one to three months. The existing agreement calls for easing cuts from July, a plan Russia has agreed to. Meanwhile, the group is watching developments in US shale as oil-drilling rigs contract for the eleventh week. 

While the global oil market remains oversupplied, the latest rally in crude prices was sparked by hopes demand will surge as the global economy reopens, and OPEC+ could extend production cuts. But with WTI contracts rallying 279% in 25 sessions, higher prices could lead to shale coming back online, which is something OPEC+ does not want. 

To date, there is still no agreement to extend production output cuts. And while cut optimism has rocketed crude prices higher in the last month, delegates said Saudi Arabia and Russia want pledges from all members that they would abide by future cuts. 

Saudi Arabia showed "good compliance with the pact by reducing its output by 2.9 million barrels a day in May to 8.7 million," said Salih Yilmaz, an analyst at Bloomberg Intelligence.

"The kingdom may now look to provide further support for oil prices by leading OPEC to extend current output cuts for a couple of months," said Yilmaz. oil

As for crude's rally, well, the continuation or reversal appears to be in the hands of OPEC+ this week.