Traders think that the likely decisions to be taken at the OPEC technical meeting this week will boost oil supply, and on Monday the oil price dropped about 1%.
Brent crude LCOc1 fell 29 cents, or 0.7%, to $42.95 a barrel by 0510 GMT while West Texas Intermediate (WTI) crude CLc1 was at $40.25 a barrel, down 30 cents, or 0.7%.
Oil has changed little over the past week, as the revival of coronavirus cases may bring up travel restrictions that would reduce the oil demand of several states in the US, the world’s largest consumer.
However, prices rose more than 2% on Friday as the 2020 oil demand forecast increased 400,000 barrels a day.
Allied oil producing countries, including the Organization of Petroleum Export Countries and Russia, the group known as OPEC + recovered the oil prices from the last ten years’ lows in April, by reducing the daily supply by 9.7 million barrels (bpd). Starting in May that would continue till the end of July.
OPEC Joint Ministerial Monitoring Committee will meet on Tuesday and Wednesday to discuss the next cut, after compliance with the group’s decision, which reached 77% in May, reached 107% in June.
OPEC and Russia expect supply cuts to be reduced to 7.7 million bpd, as global oil demand is recovering and prices are back.
In the medium term, a good job has been done to bring prices to a high expected level, so decisions to be taken this week must be made with precision. In fact, the simple formulation is obvious, but it depends on the patience of the countries whose industry relied on oil.
Despite Us based oil producers reduced the number of oil and gas facilities to a record level in the 10th consecutive week, they started drilling when they saw the high prices. However, prices must remain at this level to continue drilling.
Libya exported its first crude oil cargo on Friday, but later on again applied force majeure to all oil exports on Sunday.