Oil prices ease after OPEC, allies reach new agreement
Brent crude fell 27
cents, or 0.6 per cent, to $43.52 a barrel by 0439 GMT, and U.S. West Texas
Intermediate (WTI) crude dropped 32 cents, or 0.8 per cent, to $40.88 a barrel.
They rose two per
cent the previous day, helped by the U.S. crude inventories drop.
The Organisation of
the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed
on Wednesday to scale back oil production cuts from August as the global
economy slowly recovers from the coronavirus pandemic.
OPEC+ has been
cutting output since May by 9.7 million barrels per day, or 10 per cent of
global supply, but from August, cuts will officially taper to 7.7 million bpd
until December.
“Some investors took
profits after the OPEC+ decision, but a big draw in U.S. crude provided some
support,’’ Kazuhiko Saito, Chief Analyst at Fujitomi Co said.
Data from the Energy
Information Administration showed U.S. crude inventories fell 7.5 million
barrels last week, shrinking much more than the 2.1 million-barrel drop
expected by analysts in a Reuters’ poll.
Despite the official
OPEC+ accord, Saudi Arabian Energy Minister, Prince Abdulaziz bin Salman, said
production cuts in August and September would end up amounting to about 8.3
million bpd, more than the headline number.
That’s because
countries in the grouping which over-produced earlier this year would
compensate by making extra August-September cuts, the minister said.
Oil prices are
expected to remain boxed in as more supply from OPEC+ countries will likely be
absorbed by recovering demand, said Tsutomu Kosuge, president of the commodity
research firm, Marketedge Co.
“I expect Brent will
stick to the tight range between $40.50 and $46.50 for the next month or so,’’
he said, adding rising tensions between China and the U.S. may weigh on market
sentiment.
U.S. Secretary of
State, Mike Pompeo, took fresh aim at China on Wednesday, saying the U.S. would
impose visa restrictions on Chinese firms like Huawei Technologies whom he
accused of facilitating human-rights violations.
Rystad Energy also
predicted that oil prices will stay where they are for the rest of 2020 as any
uptick will hurt already struggling refining margins and negatively impact the
most-needed recovery in refinery runs.
Elsewhere,
International Energy Agency Executive Director, Fatih Birol, said on Wednesday
that global oil markets are slowly rebalancing after the shocks seen during the
coronavirus lockdown, with prices expected at about $40/barrel in the coming
months.
Post a Comment