Oil futures rose on Wednesday to mark their biggest settlement in more than four months, fueled by the largest weekly decline in U.S. crude supplies so far this year, even as an OPEC + committee arrived to an agreement to reduce record production cuts from next month.
“Any move by OPEC + to ease production cuts would be cause for concern, but … improving market conditions, in addition to the promise that some members would make up for past overproduction, [have] it helped calm market fears, “Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch.
At the Joint Ministerial Monitoring Committee meeting on Wednesday, the Organization of the Petroleum Exporting Countries and allied producers, collectively known as OPEC +, said they would ease record production cuts from 9.7 million barrels per day to 7.7 million barrels per day from August to the end of the year amid signs of improvement in the oil market.
Participants in the agreement who were unable to fully meet the reductions in May and June, which include Iraq, will offset the additional production. Including that compensation, Saudi energy minister Prince Abdulaziz bin Salman said the actual cuts will be from about 8.1 million to 8.34 million barrels per day. However, an OPEC + document seen by S&P Global Platts showed that 13 countries rose above their quotas in the first two months of the deal by a combined total of 840,000 barrels per day.
Read:OPEC + move to cut production cuts may ‘keep a floor’ below prices
Although “the laggards are ready to deepen the cuts” in August and September to compensate for “failure to meet their previous target, it is unlikely that they will be able to achieve 100% compliance,” said Paola Rodríguez-Masiu, senior analyst for oil markets at Rystad Energy, in a market update. “In the case of Iraq, we believe that the objective set to offset the alliance is too ambitious given Iraq’s serious economic need for oil revenues at this time.”
West Texas Intermediate Crude for August delivery CL.1,
On the New York Mercantile Exchange, it rose 91 cents, or 2.3%, to settle at $ 41.20 per barrel. September Brent crude BRN.1,
the global benchmark index ended 89 cents, or 2.2%, higher at $ 43.79 a barrel at ICE Futures Europe.
Both WTI and Brent crude marked the highest contractual deals since March 6, according to Dow Jones Market Data.
In the United States on Wednesday, the Energy Information Administration reported that national crude inventories fell by 7.5 million barrels for the week ending July 10. Compared to a forecast by analysts surveyed by S&P Global Platts for an average decrease of 2.1 million barrels. The American Petroleum Institute reported a drop of 8.3 million barrels on Tuesday.
“A big drop in imports has produced the biggest draw for oil inventories since the last week of last year,” said Matt Smith, director of commodity research at ClipperData.
“Imports into the Gulf of the United States were more than halved compared to the previous week, as the Saudi crude fleet was finally offloaded,” he told MarketWatch. “According to our records, imports of Saudi crude into the US Gulf fell to a 9-week low last week, a drop of nearly 80% in the previous week. As a result, US Gulf Coast crude stocks decreased by 7.9 million barrels. ”
Although the decline in crude inventories implies an increase in consumption, Lukman Otunugua, senior research analyst at FXTM, warned that “the increase in coronavirus cases in the United States, along with some cities in the major economies returning closing closings can affect demand. “
EIA data also showed that crude stocks at the Cushing, Oklahoma, storage facility increased by about 900,000 barrels during the week. Gasoline supply decreased by 3.1 million barrels, while distillate stocks decreased by 453,000 barrels. The S&P Global Platts survey showed expectations of a decrease in supply of 2 million barrels for gasoline and an inventory increase of 1.1 million barrels for distillates.
On Wednesday Nymex, August RBQ20 gasoline,
added 1.4% to $ 1.2645 per gallon, while HOQ20 heating oil augmented,
added 2% to $ 1.2448 per gallon.
August of natural gas NGQ20,
it settled at $ 1,778 per million British thermal units, up 1.8%, ahead of the EIA weekly update on fuel supplies, due out on Thursday.
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