Oil Stays Up Over Inventory Draw But OPEC Production Increase Looms
-Oil was up Friday morning in Asia, a day before the Organization of the Petroleum Exporting Countries (OPEC) opens up more production and new data pointed to an uncertain economic recovery.
OPEC decided earlier this month to dial back production cuts, a move that will see an increase in production of about 1.5 million barrels per day starting in August.
RBC Capital Markets warned in a note that “despite the resilient and range-bound nature of oil pricing over recent weeks, plateauing global demand and increasing OPEC+ output raises the question of whether the market can absorb additional barrels.”
Data out of the U.S. suggested the economic recovery from the pandemic may be difficult and long. The country reported its economy contracted 32.9% in the second quarter of the year, the biggest single-quarter contraction since at least the Second World War.
Still, the U.S. Energy Information Administration (EIA) reported on Wednesday a 10.612 million barrel draw in inventories for the prior week, substantially higher than the 0.357 million barrel build in forecasts prepared by Investing.com.
Meanwhile, China’s National Bureau of Statistics reported an official manufacturing Purchasing Manager’s Index (PMI) of 51.1 earlier in the day. The figure, which beat analyst forecasts of 50.7 prepared by Investing.com, indicated an expansion in Chinese factory activity and boosted oil prices.
Oil prices have been trading in a range for weeks, with investors weary of an uncertain economic outlook as the COVID-19 pandemic continues to rage. There are now more than 17.2 million cases and over 671,000 deaths worldwide, with almost 4.5 million cases and over 150,000 deaths in the U.S alone, according to Johns Hopkins University data.