Oil prices dropped on Thursday after allies like OPEC and Russia agreed to cut record supply sidewalks starting in August. However, this decline eased in the hopes of a rapid demand for US demand after the drop in the US crude oil stocks.
Brent crude LCOc1 fell 27 cents, or 0.6%, to $43.52 a barrel by 0439 GMT, and West Texas Intermediate (WTI) crude CLc1 dropped 32 cents, or 0.8%, to $40.88 a barrel. By the way, they rose 2% the previous day, helped by the U.S. crude inventories drop.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC +, agreed on Wednesday to reduce oil production cuts in August, with the global economy slowly recovering inconveniences caused by the coronavirus pandemic.
In fact, there is no change in the official schedule, OPEC + reduces production by 9.7 million barrels per day or 10% of global supply, from May till the end of July, but cuts starting from August will be 7.7 million bpd till December.
The data showed that US crude oil stocks fell down to 7.5 million barrels last week, more than the 2.1 million barrels expected by analysts.
After all, production cuts in August and September are estimated that will be around 8.1 million-8.3 million bpd. It is said that overproducing countries earlier this year will compensate by making extra cuts between August and September.
Not much is expected in oil prices, as more supply from the OPEC + countries will likely meet the increased demand nowadays.
Oil prices are expected to remain calm for the rest of 2020, as any increase affects refinery margins and that surely have a negative impact in the most needed recovery time of period for refineries.
In short, it can be said that the global oil markets are gradually rebalanced after shocks in coronavirus deadlocks, and it is not surprising that prices will hover around around $ 40 a barrel in the coming months.