OPEC and Rus­sia may ease oil pro­duc­tion cuts

TO­TAL DE­MAND FOR GASO­LINE IN THE UNITED STATES ROSE IN EARLY JULY, BUT IT FELL IN TEXAS, ARI­ZONA AND FLORIDA, WHICH HAVE SEEN RE­CENT SURGES IN RE­PORTED CASES OF CORO­N­AVIRUS IN­FEC­TION.

The News Tribune - - Nation & World - BY STAN­LEY REED New York Times

Saudi Ara­bia, the world’s largest oil ex­porter, and other ma­jor oil pro­duc­ing coun­tries are likely to in­crease their out­put in Au­gust, as coro­n­avirus lock­downs ease and de­mand be­gins to rise again.

The Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, Rus­sia and other pro­duc­ers are ex­pected to mod­estly ease the record pro­duc­tion cuts that they agreed to in April and later ex­tended through July. A com­mit­tee of key of­fi­cials from OPEC and Rus­sia will meet on Wed­nes­day by video con­fer­ence to dis­cuss their ap­proach to the mar­ket.

The oil pro­duc­ing coun­tries want to make sure that they main­tain or in­crease their share of the re­cov­er­ing mar­ket.

But an­a­lysts say that the ac­tions by OPEC and its al­lies could be out­weighed by the im­pact of the pan­demic on de­mand. The In­ter­na­tional En­ergy Agency said oil de­mand fell by more than 16 mil­lion bar­rels a day in the sec­ond quar­ter com­pared with the same pe­riod in 2019. The Paris-based group is fore­cast­ing a strong re­cov­ery but said the spread of the virus in coun­tries like the United States and Brazil and else­where “is cast­ing a shadow” over the out­look by rais­ing the prospect of fur­ther lock­downs that could dis­cour­age driv­ing and other ac­tiv­ity.

To­tal de­mand for gaso­line in the U.S. rose in early July, a big month for driv­ing, the agency said, cit­ing data from the re­search firm Kayrros, but it fell in Texas, Ari­zona and Florida, which have seen re­cent surges in re­ported cases of in­fec­tion.

“We could be in for a sec­ond dose of fall­ing de­mand,” said Bill Far­renPrice, a di­rec­tor at RS En­ergy Group, a mar­ket re­search firm.

Oil prices have been on a wild ride in the last few months. They plum­meted in April into neg­a­tive ter­ri­tory, de­spite the deal days ear­lier by OPEC and the other oil pro­duc­ing na­tions for deep cuts in their May and June pro­duc­tion, as de­mand col­lapsed and the world ran out of places to put all the oil the in­dus­try was pump­ing out. But a month later, as the global econ­omy started to show signs of life and the pro­duc­tion cuts by OPEC and pro­duc­ers in the United States be­gan to take ef­fect, oil prices climbed back above $30 a bar­rel.

In early June, the group, known as OPEC Plus, de­cided to ex­tend the 9.7 mil­lion bar­rel-a-day cuts through July. The Saudis also re­duced pro­duc­tion “vol­un­tar­ily” by an­other 1 mil­lion bar­rels a day in June to the low­est lev­els in three decades.

Un­less there is a change in think­ing, the pro­duc­tion cuts will ease to 7.7 mil­lion bar­rels a day in Au­gust, as agreed in April.

On Fri­day, Brent crude traded at $43.24 a bar­rel, still about 35% be­low the level at the be­gin­ning of year, and West Texas In­ter­me­di­ate, the Amer­i­can bench­mark, was trad­ing at $40.55 a bar­rel.

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