Oil rises as Opec+ prepares to restore some oil supply from August

Oil cartel Opec+ and its allies will restore some oil supplies in August, but the impact will be “barely felt” as demand recovers from the coronavirus crisis, Saudi Arabia’s energy minister said on Wednesday.

After almost three months of historic output curbs to offset the worst effects of the global pandemic, the 23-nation coalition led by Riyadh and Moscow will proceed with its plan to gradually taper the reductions. The decision was widely expected but still carries some risks for the cartel after a resurgence of the virus in the US, the world’s largest oil consumer.

Brent crude rose 14c, or 0.3%, at $43.04 a barrel, and US West Texas Intermediate crude rose 13c, or 0.3%, to $40.42 a barrel in New York.

“As we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of production cuts will be consumed as demand continues on its recovery path,” Saudi energy minister Abdulaziz bin Salman said at the start of an Opec+ video conference on Wednesday. “Economies about the world are opening up, though this is a cautious and gradual process. The recovery signs are unmistakable.”

The cartel and its allies will withhold 7.7-million barrels a day from the market in August, compared with cuts of 9.6-million now. The group’s two largest members, Russian and Saudi Arabia, publicly backed the move, and other ministers participating in the video conference had agreed in principle, delegates said.

That supply increase will be offset somewhat by members that did not fulfil their commitments to reduce output in May and June — such as Iraq and Nigeria. They will make up for those shortcomings with 842,000 barrels a day of extra reductions in August and September, delegates said.

On paper, full delivery of the compensation cuts could shrink the 2-million barrels a day supply increase scheduled for August by almost half. However, it is unclear how much of the reparations will actually be delivered by countries that have consistently failed to fulfil their pledges.

Source: businesslive.co.za