Deal to ease oil supply cuts from August pushes oil price down
However, the drop has been cushioned by tightening global inventories as economic activity picks up
London — Oil prices fell on Thursday after Opec and other producers including Russia agreed to ease record supply curbs from August, though the drop was cushioned by tightening global inventories as economic activity picks up.
Brent crude fell 35 US cents, or 0.8%, to $43.44 a barrel by 8.52am GMT.
West Texas Intermediate (WTI) crude was down 49c, or 1.2%, to $40.47 per barrel.
Both contracts rose 2% the previous day after a sharp drop in US crude inventories.
Opec+ agreed on Wednesday to scale back oil production cuts from August. They countries will reduce their cuts to 7.7-million barrels per day through December from the 9.7-million bpd cuts in place since May.
“Things are getting back to normal on the oil market,” said Norbert Rücker, head of economics research at Julius Baer.
“The petro-nations announced the partial lifting of their production restrictions as oil demand rebounds and signs of an easing supply glut emerge ... The economic recovery puts demand above supply.”
Saudi Arabian energy minister Prince Abdulaziz bin Salman said production cuts in August and September would end up amounting to about 8.1 million-8.3 million bpd, more than the headline number.
That is because countries in the grouping which over-produced earlier this year would compensate with extra August-September cuts, he said.
Oil prices are expected to remain boxed in as more supply from Opec+ countries will likely be absorbed by recovering demand, said Tsutomu Kosuge, president of commodity research firm Marketedge.
“I expect Brent will stick to the tight range between $40.50-$46.50 for the next month or so,” he said, adding rising tensions between China and the US may weigh on market sentiment.
International Energy Agency executive director Fatih Birol said on Wednesday that global oil markets were slowly rebalancing, with prices of about $40 per barrel expected in coming months.
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