Yesterday oil prices jumped 2% based on bullish inventory data.
Oil prices rose nearly 2% on Wednesday after a favourable U.S. inventory report from the Energy Information Administration (EIA), an OPEC agreement to taper the production cuts, and assurances from U.S. President Trump that Washington will not levy sanctions on China for its treatment of Hong Kong.
Oil price futures were up more than 2% on Wednesday, with spot prices for WTI up 1.71% at $40.98 at 6:30pm EDT. Brent crude was trading up 1.75% at $43.65.
The news piggybacked on the good news from the EIA, which on Wednesday confirmed the API’s report a day earlier that crude oil stocks in the United States had fallen by more than 7 million barrels. This is attributed to fewer crude oil imports from Saudi Arabia.
OPEC on Wednesday added to the upward price momentum despite the fact that it agreed to ramp up production once again, with the market interpreting the move as OPEC’s confidence in the upswing in crude oil demand.
The extra production that OPEC will start pumping into the market in August will not directly affect U.S. inventories for another couple of months.
Despite the devastating coronavirus pandemic that locked down China for weeks, the country’s overall crude oil imports during the first half of the year rose 9.9 percent on the first half of 2019, customs data cited by Reuters has revealed.
Today morning oil prices ease after OPEC, allies agree to taper oil supply curbs.
Oil prices eased on Thursday after OPEC and allies such as Russia agreed to taper record supply curbs from August, though the drop was cushioned by hopes for a swift U.S. demand pick-up after a big drawdown from the country’s crude stocks.
Brent crude LCOc1 fell 27 cents, or 0.6%, to $43.52 a barrel by 0439 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 dropped 32 cents, or 0.8%, to $40.88 a barrel. They rose 2% the previous day, helped by the U.S. crude inventories drop.
The Organization 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% of global supply, but from August, cuts will officially taper to 7.7 million bpd until December.
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 8.1 million-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 commodity research firm Marketedge Co.
“I expect Brent will stick to the tight range between $40.50-46.50 for the next month or so,” he said, adding rising tensions between China and the United States may weigh on market sentiment.
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, it said in a note.
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.