Oil falls on fears of glut as OPEC+ set to boost output

Marco Green
August 4, 2020

Oil prices were up more than 1% on Monday on positive economic data from the United States, Europe and Asia, but investors remained concerned about rising COVID-19 cases globally and oversupply as OPEC begins to lift supply cuts.

Brent rose 86 cents, or 2 percent, to $44.38 per barrel, while West Texas Intermediate settled up 74 cents, or 1.84 percent, higher at $41.01 per barrel, on the strength of the Institute for Supply Management disclosing that us manufacturing activity accelerated to its highest level in almost 18 months in July, during the height of the new Covid outbreaks in the southern states.

Investors, however, continue to worry about the economic recovery as coronavirus cases climb, with known infections reaching nearly 18 million globally.

"Investors are anxious about supply gluts as the OPEC+ is due to start reducing production cuts this month and a recovery in oil prices from record lows is expected to encourage USA shale producers to ramp up output", said Hiroyuki Kikukawa, general manager of research at Nissan Securities. Distillate stockpiles, which include diesel and heating oil, likely grew by 800,000 barrels, while crude stocks fell by 3.3 million barrels in the week to July 31.

The Australian state of Victoria declared a state of disaster and authorities in the Philippines said they would impose fresh restrictions in Manila this week, reflecting worries around the world about getting the pandemic under control.

However, oil prices found some support after a survey showed that manufacturing activity across the euro zone expanded for the first time since early 2019 last month. From this month on, the agreed cuts will be lowered to 7.7 million barrels per day (bpd).

Russian oil and gas condensate output increased to 9.8 million bpd on August 1-2 from 9.37 million bpd in July, a source familiar with data said on Monday.

"On the demand side, we had quite encouraging global manufacturing (data) ... but there's still quite a bit of evidence of the oil demand recovery stalling in quite a few markets with a resurgence of COVID-19", said Lachlan Shaw, head of commodity research at National Australia Bank (OTC:) (NAB). Therefore Fusion Media doesn't bear any responsibility for any trading losses you might incur as a result of using this data.

Other reports by Click Lancashire

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