On Thursday, oil prices inched down following OPEC+’s decision to scale back its oil output cut pact. However, the data of plummeting US crude inventories cushioned the fall.
By 00.15 GMT, Brent crude oil futures slipped by 0.3% or 13 cents to USD43.66/barrel while the US WTI crude slid by 0.4% or 18 cents to USD41.02/barrel.
Both benchmarks rose by 2% on Wednesday due to the report of the significant drop in US crude oil inventories.
On Wednesday, the Organization of Petroleum Exporting Countries and its non-member allies (OPEC+) decided to ease its oil production cut pact starting in August as the world’s economy is gradually recovering from the coronavirus pandemic.
After the current cuts of 9.7 million bpd since May expired on July 31, the group’s output would be eased to 7.7 million bpd until December.
The oil prices fall were able to be cushioned by the data from the US Energy Information Administration (EIA), showing that the country’s crude oil stockpiles plunged by 7.5 million barrels in the week ended July 10. Analysts only estimated a 2.1 million barrels drop.
Saudi Arabian Energy Minister Prince Abdulaziz bin Salman’s statement also provided a breather for the oil market. He said that in August and September, OPEC+ output cut would amount to roughly 8.1-8.3 million bpd, higher than the official target, as the previously lacking countries are compensating for their higher oil outputs in the previous months with extra cuts.
However, Rystad Energy noted that prices would have to stay at the current level for the rest of 2020, as any increase would harm the already struggling refining margins and also affecting negatively the required recovery in refinery runs.
The higher supply volumes would likely be offset by the increase in crude processed by refineries, Rystad Energy added.
Separately, on Wednesday, the International Energy Agency Executive Director Fatih Birol projected that the global oil markets are gradually rebalancing at a slow pace after the coronavirus lockdowns in many parts of the world.
In the coming months, oil prices would average at around USD40/barrel, Birol estimated.
