Oil prices advanced on Wednesday after a huge plunge in United States crude storage as the market awaited decisions from a meeting later in the day on the future level of supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies.
Brent crude futures were up by 36 cents or 0.84% at $43.26 per barrel as of 11:15 West Africa Time while its counterpart U.S. benchmark, West Texas Intermediate (WTI) futures inched up by $38 cents or 0.94% to $40.67.
Demonstrating a rebound in fuel demand in spite of the coronavirus crisis, U.S. crude stocks tumbled by 8.3 million barrels in the week to 10th July, surpassing analysts’ projection of a slump of 2.1 million barrels, according to statistics from industry group, American Petroleum Institute.
Official figures from the U.S. Department of Energy’s Energy Information Administration (EIA) are to be issued on Wednesday.
ING Economics mentioned in a note seen by Reuters that “API numbers released overnight have provided some support to the market in early morning trading today.”
Regarding supply, the market will be on the lookout for resolutions from a conference of OPEC’s Joint Ministerial Monitoring Committee (JMMC) on Wednesday.
“The market will be eager to see if deeper cuts will be rolled over for an additional month, or whether the group will stick to the original plan, and start trimming cuts,” said ING Economics, adding that “most indications suggest that it will be the latter, with more focus on compliance and compensatory cuts.”
Top members of OPEC and allies, collectively called OPEC+, are poised to determine whether to expand existing production cuts of 9.7 million barrels per day (bpd) expiring this month or taper them to 7.7 million.
Kim Kwang-rae of Samsung Securities in Seoul said “oil prices are likely to be traded in a range of $40, with the market paying close attention to today’s JMMC results.”
OPEC and its allies attained 107% compliance in June with their agreed output cuts, an OPEC+ source said on Tuesday.
As regards demand, OPEC estimated global oil demand would balloon by a record 7 million bpd in 2021 amidst global economic recovery from the virus.
Nevertheless, this would stay below 2019 levels.
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