Lingering concerns over rising Coronavirus infections worldwide and its impact on demand continued to weigh on crude market sentiment and limit any upside.
More than 14.5 million people have been infected by the novel Coronavirus globally and more than 604,000 have died of COVID-19, the disease caused by the pathogen, according to a Reuters tally. Johns Hopkins University data shows the rolling three-day daily average for cases globally at a record high 242,000, with the US contributing to nearly 30% of these case counts.
While fuel demand has recovered from a 30% drop in April after countries around the world imposed strict lockdowns, usage is still below pre-pandemic levels. US retail gasoline demand is falling again as infections rise.
On the supply front, while OPEC+ has agreed to taper production cuts to 7.7 million b/d starting from August, extra compensation cuts of roughly 840, 000 b/d from previously non-compliant countries indicates only 1.1 million b/d of returning production, instead of the anticipated 2 million b/d.
Despite increases in oil supply from producers is negative for the oil markets amid an uncertain demand outlook, the willingness of member nations to comply with agreed production cuts and a guarantee of the principle of compensation is ultimately supportive.
In Russia, shipments of Urals crude are likely to be in line with this month’s levels, according to Bloomberg. That would be consistent with a loading plan for the first five days of August. Furthermore, Energy Minister Alexander Novak stated that increased oil production is going to be used internally. In the US, energy drillers cut the number of oil and natural gas rigs operating to a record for an 11th week in a row, data showed on Friday.