Rising COVID-19 cases globally reached 13 million infections and half million deaths, remaining a key drag on market sentiments. With California, the Philippines, Hong Kong and Australia tightening restrictions again as daily infections spike, July could be an even more challenging month for oil than expected.
Moreover, the market will be monitoring closely the publication of data on fuel consumption due on Tuesday from the API, and on Wednesday from the Energy Information Administration. According to a Reuters poll U.S. gasoline stockpiles are expected to be down by 900,000 barrels and crude oil inventories by 2.3 million barrels in the week to July 10.
On the supply side, all eyes are on the OPEC+ Joint Ministerial Monitoring Committee meeting on July 15, where a final recommendation will be made over extending the current 9.7 million b/d production cuts or easing into a lower 7.7 million b/d cuts in August.
Whilst an extension is deemed to be unlikely according to sources familiar with the negotiations, it remains to be seen if renewed lockdowns and the resulting uncertainty in demand will push OPEC+ to extend its current record production cuts. Meanwhile, Iraq improved compliance to OPEC+ production cut agreement to 90% in June, while also promising to compensate for the country’s overproduction in previous months.
Citi analysts forecasted a short-term potential fallout of prices as a result of OPEC+ increased oil production, along with the potential for increased Libyan output, a return of 20%-30% of North American production and the end of China’s crude buying spree.