Oil Prices Fall As OPEC+ Enters Critical Period For Production Deal
Oil prices fell Wednesday as an OPEC+ advisory panel meets during a critical period for its production agreement, while U.S. inventory data signaled weakening demand.
The oil group’s Joint Ministerial Monitoring Committee convenes today to assess compliance with its deal after countries that produced beyond their quotas vowed to adhere to the cuts. Iraq, Nigeria, Angola, Russia, and Kazakhstan were among the cheaters.
OPEC+ will scale back production cuts to 7.7 million barrels per day this month, from 9.7 million bpd previously.
“Today’s OPEC + meeting is all about compliance and making sure the cheaters are making up for exceeding their oil-output targets,” Edward Moya, market analyst at Oanda, wrote in a morning market report. ” Iraq and Nigeria have said all the right things, but if they don’t follow through on their promises, risks will grow that other producers will abandon the accord.”
Moya also warned that the smaller stimulus package expected from the U.S. Congress is weighing on the overall economy.
“The economic recovery is stalling and that will likely force OPEC+ to hold off on restoring more production over the next couple of months.”
Oil Prices Dip
Brent crude futures fell 1.4% to $44.84 per barrel. U.S. oil prices were down 1.1% to $42.40. After rebounding from historic lows in April, oil prices have been stuck in the low $40s for several weeks
Exxon Mobil (XOM) shares edged up 0.1% on the stock market today. Chevron (CVX) dipped 0.5%. Among top U.S. shale producers, EOG Resources (EOG) lost 0.8% and Parsley Energy (PE) dipped 0.8%.
Oil prices came under further pressure after the Energy Information Administration reported stockpiles fell by 1.6 million barrels last week, signalling weaker demand.
Analysts polled by S&P Global Platts saw a 3.8 million-barrel drop in crude supplies. The American Petroleum Institute, an industry group, reported a 4.26 million-barrel drop late Tuesday.