Crude Oil Rises as US Producers Hold Back Supply
By Adedapo Adesanya
Crude oil prices appreciated on Wednesday night after dropping earlier in the day following the United States’ call to the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to increase supply to support the global recovery from the pandemic.
This action lifted the Brent crude by 96 cents or 1.33 per cent to $71.57 per barrel and pushed the West Texas Intermediate (WTI) higher by $1.07 or 1.57 per cent to $69.36 per barrel.
The White House on Wednesday called on the oil-producing allies to boost production in an effort to combat climbing fuel prices, amid concerns that rising inflation could derail the economic recovery from COVID-19.
It was revealed that the Mr Joe Biden administration spoke with representatives from OPEC’s de facto leader, Saudi Arabia, this week, as well as with representatives from the United Arab Emirates and other OPEC+ members.
The White House said the group’s July agreement to boost production by 400,000 barrels per day on a monthly basis beginning in August and stretching into 2022 was “simply not enough” during a “critical moment in the global recovery.”
This led to oil prices dropping but this changed when the White House clarified that it would not call on US producers to increase crude output and that efforts to increase OPEC production were a longer-range plan.
OPEC+ made the unprecedented decision in April 2020 to remove nearly 10 million barrels per day from the market in an effort to support prices, while US producers also scaled back production, now it has dropped to about 6 million barrels per day.
These supply cuts, coupled with a demand recovery, have pushed Brent close to $80 per barrel, although the contract has pulled back slightly from that level in recent sessions due to the resurgence of the coronavirus.
The market also got support after the Energy Information Administration (EIA) reported a crude oil inventory decline of 400,000 barrels for the week to August 6, significantly less than expected.
This was lower than the unexpected build of 3.6 million barrels reported for the previous week that weighed prices down last week.
Analysts had expected an inventory draw of 1.05 million barrels for the first week of August.
A day earlier, the American Petroleum Institute (API) had reported a modest inventory draw of a little over 800,000 barrels per day.