Brent crude fell 13 cents, or 0.3 per cent, at $43.66 a barrel by 0015 GMT, and U.S. West Texas Intermediate (WTI) crude dropped 18 cents, or 0.4 per cent, to $41.02 a barrel. They rose 2 per cent the previous day, helped by the U.S. crude inventories drop.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Wednesday to scale back oil production cuts from August as the global economy slowly recovers from the coronavirus pandemic.
OPEC+ has been cutting output since May by 9.7 million barrels per day, or 10 per cent of global supply, but from August, cuts will officially taper to 7.7 million bpd until December.
“Some investors took profits after the OPEC+ decision, but a big draw in U.S. crude provided some support,” Kazuhiko Saito, chief analyst at Fujitomi Co said.
Data from the Energy Information Administration showed U.S. crude inventories fell 7.5 million barrels last week, shrinking much more than the 2.1 million-barrel drop expected by analysts in a Reuters poll.
Despite the official OPEC+ accord, 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’s because countries in the grouping which over-produced earlier this year would compensate by making extra August-September cuts, the minister said.
Still, oil prices are expected to remain static as an increase in crude processed by refineries is likely to offset higher supply volumes, Rystad Energy said in a note.
“We find that prices will have to stay where they are for the rest of 2020 as any uptick will hurt already struggling refining margins and negatively impact the most-needed recovery in refinery runs,” it said.
Elsewhere, International Energy Agency Executive Director Fatih Birol said on Wednesday that global oil markets are slowly rebalancing after the shocks seen during the coronavirus lockdown, with prices expected at about $40/barrel in the coming months.