Oil prices rose slightly overnight as OPEC and its allies cut production by more than agreed to in June, although demand concerns lingered due to increased cases of COVID-19 in the United States.
Brent crude futures settled up 18 US cents at $US42.90 a barrel, after moving lower earlier in the session. US West Texas Intermediate (WTI) crude futures rose 19 US cents to $US40.29 a barrel.
Crude futures strengthened in post-settlement trading, rising after the American Petroleum Institute, a trade group, said US crude inventories fell more than expected in the latest week.
The market will be watching for additional weekly data Wednesday from the US Energy Information Administration.
Analysts estimate that US gasoline stockpiles fell by 600,000 barrels and crude oil inventories by 2.1 million barrels last week, a preliminary Reuters poll showed.
The Organisation of the Petroleum Exporting Countries and its allies led by Russia, collectively known as OPEC+, have delivered compliance of 107 per cent with their agreed oil output cuts in June, an OPEC+ source said on Tuesday.
The market is eagerly awaiting news from OPEC+ on the next level of production cuts. OPEC’s Joint Technical Committee meets on Tuesday, with the Joint Ministerial Monitoring Committee due to meet on Wednesday.
Under the existing supply pact, OPEC+ is set to taper its record production cut of 9.7 million barrels per day (bpd) to 7.7 million bpd from August through December.
“OPEC+ speculation had weighed the market down, and now the compliance data came out, and that’s supportive,” said John Kilduff, a partner at Again Capital Management.
Still, the market remained cautious on concerns that states could increase coronavirus lockdown measures as California did on Monday, following similar moves in other states, such as Florida and Texas.
New restrictions were also introduced in Asia.
The oil market is moving closer to balance as demand gradually rises, OPEC’s secretary general said on Monday.
OPEC’s monthly report said it expected global demand to grow by a record 7 million bpd next year, but that demand will still be weaker than pre-COVID.
China’s June crude oil imports hit both daily and monthly highs, data showed.
However, Citi analysts said the looming supply increase could weigh on prices given demand uncertainties. Morgan Stanley said oil demand is unlikely to exceed pre-COVID levels until late 2021.