TOKYO (Reuters) – Oil prices fell on Thursday after OPEC and its allies, led by Russia, agreed to reduce record supply restrictions from August, but hopes of a speedy recovery in demand in the United States after a massive drawdown in crude stocks held it lower.
By 0646 GMT, Brent crude fell 33 cents, or 0.8 percent, to $ 43.46 a barrel. US West Texas Intermediate crude fell 42 cents, or 1 percent, to $ 40.78 a barrel. Prices rose 2 percent on Wednesday, driven by lower US crude inventories.
The Organization of the Petroleum Exporting Countries and its allies, the group known as OPEC +, agreed on Wednesday to reduce oil production cuts from August as the global economy slowly recovered from the consequences of the emerging Corona virus pandemic.
OPEC + has cut production by 9.7 million barrels per day since May, equivalent to ten percent of global supplies, but as of August, cuts are officially scheduled to drop to 7.7 million barrels per day until December.
Data from the US Energy Information Administration showed that US crude inventories fell by 7.5 million barrels last week, compared to analysts’ estimates in a Reuters poll of a drop of 2.1 million barrels.
Despite the official OPEC + agreement, Saudi Energy Minister Prince Abdulaziz bin Salman said that production cuts in August and September would eventually amount to between 8.1 and 8.3 million barrels per day. The reason, the minister added, is that countries from the group overproduced earlier in the year that will compensate for that through additional cuts in August and September.
Fatih Birol, CEO of the International Energy Agency, said on Wednesday that the balance is slowly returning to the global oil markets after the shocks experienced during the closures imposed by governments around the world to contain the Corona virus. Birol added that oil prices are expected to reach about $ 40 a barrel in the coming months.