The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed on Wednesday to continue a policy of phasing out record production cuts, adding 400,000 barrels per day (bpd) to the market each month.
Oil prices fell on Thursday after OPEC+ approved sustaining the policy of adding 400,000 barrels per day at a time when coronavirus cases around the world are rising and many US refineries, a major source of demand for petroleum products, are offline.
Brent crude fell 16 cents, or 0.2%, to $71.43 a barrel as of 0422 GMT, after falling 4 cents on Wednesday.
West Texas Intermediate (WTI) oil, which rose 9 cents in the previous session, fell 23 cents, or 0.3%, to $68.36 a barrel.
While OPEC+ raised its demand forecast for 2022, it also faced pressure from USA to ramp up production increases. USA said that it is “pleased” as OPEC reaffirmed its commitment to increase supply.
But the important thing to consider is the risks of new lockdown to combat the as yet unresolved Covid-mutant spread, and whether demand can grow as fast as OPEC+ and the market predicted.
In the US, operators faced power and water shortages after Hurricane Ida swept the region and oil refineries in Louisiana. It could take weeks to restart after production was disrupted, which could tighten the oil demand.
The US offshore regulator said energy companies are scrambling to restart platforms and pipelines in the Gulf, and about 1.4 million barrels of oil production is still offline.
U.S. crude inventories have fallen by 7.2 million barrels and oil products supplied by refineries have risen to a record high despite an increase in coronavirus infections across the country, the Energy Information Administration said on Wednesday.
Nevertheless, crude inventories are likely to rise in the coming weeks as it shows that resumption of refinery activity after Hurricane Ida will take longer than crude production.
