Saudi Arabia, the world’s largest oil exporter, and other major oil-producing countries are likely to increase output in August, as coronavirus closures ease and demand begins to rise again.
The Organization of the Petroleum Exporting Countries, Russia and other producers are expected to modestly ease the cuts of unprecedented production that they agreed on in April and subsequently extended until July. A committee of key officials from the Organization of the Petroleum Exporting Countries and Russia will meet by video conference on Wednesday to discuss their approach to the market.
Oil-producing countries want to ensure that they maintain or increase their market share in recovery.
But analysts say the actions of OPEC and its allies could be outweighed by the pandemic’s impact on demand. The International Energy Agency said that demand for oil fell by more than 16 million barrels per day in the second quarter compared to the same period in 2019. The group, based in Paris, anticipates a strong recovery, but said that the spread of the virus in countries like the United States and Brazil and elsewhere “is casting a shadow” on the landscape by raising the prospect of new closings that could discourage driving and other activities.
Total demand for gasoline in the United States increased in early July, a great month for driving, the agency said, citing data from research firm Kayrros, but fell in Texas, Arizona and Florida, which have seen recent increases in reported infection cases.
“We could be facing a second dose of falling demand,” said Bill Farren-Price, director of RS Energy Group, a market research company.
Oil prices have been in a rampant race in recent months. They plunged into negative territory in April, despite an agreement days earlier by OPEC and the other oil-producing nations for deep cuts in their production in May and June, as demand plummeted and the world ran out of places to put all the oil that the industry was pumping. But a month later, when the world economy began to show signs of life and OPEC production cuts and producers in the United States began to take effect, oil prices rose again above $ 30 per barrel.
In early June, with road traffic, air travel and other activities still depressed, the group, known as OPEC +, decided to extend cuts of 9.7 million barrels a day until July. The Saudis also “voluntarily” cut production by another million barrels a day in June, reaching the lowest levels in the past three decades.
Unless there is a change in mentality, production cuts will be reduced to 7.7 million barrels per day – still a large amount – in August, as agreed in April.
On Friday, Brent crude traded at $ 43.24 a barrel, still 35 percent below the level of the beginning of the year, and West Texas Intermediate, the American benchmark, was trading at $ 40.55 a barrel.
The International Energy Agency said it saw some encouraging signs for the oil market. For example, he said, the amount of oil stored on ships fell in June by about 35 million barrels from record levels of more than 200 million barrels in May – a sign that increased consumption may be starting to work to remove excess that has accumulated.
An OPEC delegate said that demand was improving globally, especially in China and India, which are the main importers and clients of OPEC countries.
In an interview in April, Prince Abdulaziz bin Salman, the Saudi oil minister, said that Saudi Arabia would strive to protect the Asian market, the destination of around 50% of Saudi oil.
“No one is going to play in our backyard,” he said.