TOKYO- Oil prices fell on Thursday after OPEC+ agreed to keep its policy of gradually returning supply to the market at a time when coronavirus cases around the world are surging and many US refiners, a key source of crude demand, remained offline.
Brent crude was down by 52 cents, or 0.7 percent, at $71.07 a barrel, after dropping 4 cents on Wednesday. US oil fell 56 cents, or 0.8 percent, to $68.03 a barrel, after rising 9 cents in the previous session.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, together known as OPEC+, agreed on Wednesday to continue a policy of phasing out record production reductions by adding 400,000 barrels per day (bpd) each month to the market.
“What is not so certain … is whether demand will be able to grow as quickly as OPEC+ and the market predicts, given the risk of new lockdowns to fight the unresolved Covid-mutant spread,” Rystad Energy’s head of oil markets, BjornarTonhaugen, said in a note.
In the US, oil refineries in Louisiana may take weeks to restart after Hurricane Ida swept through the region, with operators facing power and water shortages, which is likely to crimp demand for oil.
Energy companies were scrambling to restart platforms and pipelines in the Gulf, with about 1.4 million bpd of oil production still offline, the US offshore regulator said.
US crude inventories dropped by 7.2 million barrels and petroleum products supplied by refiners rose to a record despite the increase in coronavirus infections across the country, the Energy Information Administration said on Wednesday.
“While the effects of the COVID-19 pandemic continue to cast some uncertainty, market fundamentals have strengthened and OECD stocks continue to fall as the recovery accelerates,” OPEC+ said in a statement.
OPEC+ experts on Tuesday revised the 2022 oil demand growth forecast to 4.2 million bpd, up from a previous 3.28 million bpd, potentially building the case for higher output in future.
The 2022 outlook looks optimistic based on 2021 data. OPEC+ expects demand to grow by 5.95 million bpd after a record drop of about 9 million bpd in 2020 due to the pandemic, but demand only rose by some 3 million bpd in the first half of 2021.
“Demand has disappointed relative to lofty expectations and there are still headwinds, particularly in Asia. We only expect demand to rise back to 2019 levels in the second half of 2022,” said Amrita Sen, co-founder of Energy Aspects think-tank. – Reuters
