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Oil prices have dropped after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to ease record supply cuts from next month.
The decrease was, however, curtailed by hopes of a swift recovery in US demand following a decline in its crude inventories.
Brent crude futures were reduced by $0.27 to reach $43.52 a barrel while US West Texas Intermediate (WTI) crude futures dropped by $0.32 to reach $40.88 a barrel, Reuters reported.
Data released by the Energy Information Administration (EIA) indicated that US crude inventories dropped 7.5 million barrels in the week that ended on 10 July, reducing by more than the 2.1 million-barrel drop analysts expected in a Reuters poll.
Since 1 May, OPEC+ has been reducing output by 9.7Mbpd or 10% of the world’s supply. However, the output decrease will drop to 7.7Mbpd from August until the end of this year.
On 15 July, OPEC+ agreed to scale-back oil production cuts from next month as the global economy is slowly recovering from the Covid-19 outbreak.
Last month, the group agreed to extend output cuts until the end of this month.
Fujitomi chief analyst Kazuhiko Saito told the news agency: “Some investors took profits after the OPEC+ decision, but a big draw in US crude provided some support.”
Anadolu Agency cited Saudi Arabia’s Energy Minister Abdulaziz bin Salman as saying that easing of the production cuts will not be much felt by the global oil market because excess supply will be consumed rising ‘domestic demand’ in producing nations.
Research firm Marketedge commodity research president Tsutomu Kosuge said: “I expect Brent will stick to the tight range between $40.50 and 46.50 for the next month or so.”