Oil Prices Rise Amidst Production Cuts
Crude oil prices went up on the first trading day after OPEC+ eased oil production cuts by two million barrels per day (bpd).
Brent crude rose by 2.05 per cent or 0.89 cent trading at $44.41 per barrel on Monday evening at 16:46GMT, while WTI crude sold for $41.19 with an increase of 2.33 per cent or 0.94 cent.
The relaxation in production cuts from 9.7 million bpd to 7.7 million bpd by OPEC+ starting from August left the market with fears of another supply glut.
However, OPEC’s leading producer, Saudi Arabia’s decision of not rushing to increase it’s supply might have driven prices high as confirmation was that they would keep their oil exports in August at the same level as in July.
The recent resurgence of COVID-19 in many countries, including the world’s top petroleum consumer, the United States, and relaxation in cuts, market analysts say can to cause demand and supply imbalance due to slow demand recoveries in major economies, even though some analysts are optimistic the market would soon pick.
According to a monthly survey conducted by Reuters, which was published last Friday, OPEC’s production soared in July, after Saudi Arabia, the United Arab Emirates (UAE), and Kuwait ended their collective voluntary one-month additional cuts after June.
The survey disclosed that while
Iraq and Nigeria didn’t make much progress on moving toward higher compliance, the three Arab Gulf allies pumped oil just below their quotas in July, compared to a collective additional one million-bpd cut in June, adding that they complied in all previous months and all previous deals.
The Reuters survey, also revealed that OPEC’s production averaged 23.32 million bpd in July, up by 970,000 bpd compared to June, saw the lowest OPEC oil output since 1991.
“Sluggish oil demand recovery with resurging corona virus cases in many parts of the U.S. and the world and the return of previously withheld production from OPEC+ and North America have combined to flip the oil futures curve again to a sign of a new glut looming this year,” oilprice.com reported.