Organization of the Petroleum Exporting Countries (OPEC) and its allies are set to reverse output cuts in August as oil prices steadied on Monday, pressured by rising COVID-19 cases around the globe and by oversupply worries. This is supported by positive industry data in Europe and Asia.
OPEC+ members have been cutting output since May by 9.7 million barrels per day (bpd) and from August, cuts will officially taper to 7.7 million bpd until December.
Data showed that Brent crude rose 3 cents, or 0.1%, to $43.55 a barrel, and U.S. West Texas Intermediate (WTI) crude was down 6 cents, or 0.1%, at $40.21. Brent in the last month had been trading in a range between $41 and almost $45.
The head of commodities strategy for ING, Warren Patterson said that,
“Oil continues to trade in an incredibly rangebound manner.”
He went on to say that,
“Speculators appear to be getting more nervous about the demand recovery, with the path much more gradual than market expectations coming into the second half of the year.”
Investors on the other side are also worried about oversupply, amid slow recovery of fuel demand due to the resurgence of the virus, as OPEC+, will ease oil supply curbs from August.
Coronavirus cases continue to surge in the United States and stand at almost 18 million globally with more countries imposing new restrictions or extending the current ones to control the pandemic.
Head of commodity research at BNP Paribas, Harry Tchilinguirian also said that,
“Concerns appear to be developing that a rise in OPEC+ production will coincide with uneven recovery in oil demand due to localised setbacks following secondary waves of COVID outbreaks.”
Earlier in the season, oil prices fell but found some support after a survey showed manufacturing activity across the euro zone expanded for the first time since early 2019 last month. Positive manufacturing data in Asia also capped the losses.
Russian oil and gas condensate output has also increased to 9.8 million bpd on Aug. 1-2 from 9.37 million bpd in July.
