The Strategist

Oil prices are going down as expectations for production are growing

07/13/2020 - 08:19

World oil prices are showing a decline as news about OPEC + production plans are holding traders back, according to trading data.

The price of September futures for the North Sea Brent brand oil mix fell by 0.67% to $ 42.95 per barrel. August futures for WTI crude oil fell 0.69% to $ 40.27 per barrel.

Earlier, the Wall Street Journal reported possible intention of OPEC+ to start increasing oil production in August against the backdrop of demand recovery signals. Saudi Arabia and most other members of the alliance supported the initiative, the publication said.

New OPEC + agreements started in May with a reduction in oil production of 9.7 million barrels per day for two months, and in June this condition was extended to July. Further, the volume of reductions will decrease to 7.7 million barrels per day for the period until the end of the year and 5.8 million - to the end of April 2022. The base of reference was taken in October 2018, but for the Russian Federation and Saudi Arabia an indicator of 11 million barrels per day was taken, of which, by analogy, there is a decrease of 23%, 18% and 14%, respectively.

Markets also expect meetings of OPEC + committees. A meeting of the OPEC + Technical Expert Committee (JTC) is scheduled for July 14, and a meeting of Ministerial Monitoring Committee (JMMC) - on July 15.

“The planned easing of the decline in OPEC + production next month and a likely recovery in US production may increase supply pressure,” said Stephen Innes, senior strategist on global markets at AxiCorp.