Oil Mixed As OPEC+ Is Set To Increase Production In AugustOil stays near $40 as traders wait for the upcoming OPEC+ meeting.
Oil Video 13.07.20.
Saudi Arabia Wants To Increase OPEC+ Production by 2 Million Barrels Per Day
WTI oil is under some pressure but stays above the $40 level after a Wall Street Journal report stated that Saudi Arabia wanted to increase OPEC+ output by 2 million barrels per day (bpd) from August.
This decision is not surpising since OPEC+ was initially set to reduce its oil production cuts from 9.6 million bpd to 7.6 million bpd in July but agreed to extend production cuts of 9.6 million bpd by one month.
Oil has stabilized near the $40 level while the U.S. domestic oil production has settled near 11 million bpd so OPEC+ countries believe it’s time for a modest production increase.
It remains to be seen whether traders will be seriously worried about the 2 million bpd increase in oil production which will begin in August. In my opinion, the continued spread of coronavirus is a bigger problem as it may lead to new lockdowns and put pressure on oil demand.
Recently, International Energy Agency has improved its outlook for oil demand in 2020, providing support to oil prices. However, any setbacks in the reopening of the world economy will put the current oil demand outlook under question.
The Number Of U.S. Drilling Rigs Continues To Fall
Baker Hughes reported that the number of U.S. drilling rigs had declined by 5 to 258. The number of rigs drilling for oil declined by 4 to 181.
This is a very interesting development since it seemed that the number of U.S. drilling rigs has stabilized and that U.S. domestic oil production has started to rebound.
In this light, it is especially interesting to see the new oil inventories numbers. API Crude Oil Stock Change report is scheduled to be released on Tuesday, while EIA will provide its Weekly Petroleum Status Report on Wednesday.
In case the U.S. domestic oil production dips below 11 million bpd while crude inventories fall, WTI oil may get the catalysts needed to continue the upside trend.
Oil’s recent attempt to settle below the $40 level was met with increased buying activity so oil should have decent chances to move higher in case the upcoming reports show that crude inventories and U.S. domestic oil production are declining.
For a look at all of today’s economic events, check out our economic calendar.