Oil Prices Positive Over Record US Crude Output Cuts

By Adedapo Adesanya

Oil futures wrapped the week on Friday bullish with support coming from news that the United States oil output cuts in May were the largest on record.

The international benchmark, Brent crude, gained 36 cents or 0.84 per cent to sell at $43.30 per barrel, while on the other hand, the US West Texas Intermediate (WTI) crude gained 35 cents or 0.88 per cent to settle at $40.27 per barrel.

Coinciding with the end of the month, the gains showed that both benchmarks ended the month of July with gains.

Brent crude posted a fourth month of gains and US crude posted a third as both rise from depths hit in April when much of the world was in lockdown due to the coronavirus pandemic.

Friday’s gains came on the back of reports from the Energy Information Administration (EIA) which revealed in a monthly report that US crude oil production plummeted in May, falling a record 2 million barrels per day to 10 million barrels per day.

Also adding to this was investors latching onto drop in the dollar. The American currency extended its dramatic fall on Friday and was on course for its biggest monthly drop in years after it was revealed that US gross domestic product (GDP) collapsed at a 32.9 per cent annualized rate – the steepest decline in output since records began in 1947.

However, analysts warn that this may not be sustainable with increasing coronavirus infections raising the risk of renewed lockdowns and threatening any rebound.

Almost 300,000 new coronavirus cases were reported to the World Health Organization (WHO) over the last 24 hours, marking the largest single-day increase ever, according to WHO on Friday.

More than half the 292,527 new cases reported on Thursday came from the Americas, which had 171,946 cases, according to data from the WHO. Southeast Asia reported the second-highest number of cases, with 60,113 reported infections, followed by Europe, with 25,241.

Globally, the virus has infected more than 17 million people and killed at least 668,910 since it emerged almost seven months ago, according to data gathered by Business Post.

This increase is coming at a time when the Organization of the Petroleum Exporting Countries and their allies, OPEC+ are set taper production cuts from 9.7 million barrels per day to 7.7 million barrels starting on Saturday.

Traders will next week closely monitor oil output increases by OPEC+ as they collectively plan to increase production, adding about 1.5 million barrels per day to global supply, after slashing output from May to July.