Crude prices edged mildly lower at midday during European trade July 17, as market participants digested OPEC+'s supply boost announced earlier this week and awaited more clarity on the demand picture as several countries ease out of lockdowns.
At 1138 GMT, ICE Brent September crude futures were 34 cents lower than the previous settle at $43.03/b while the NYMEX light sweet August crude contract was down 21 cents at $40.54/b.
OPEC+ confirmed at its key July 15 Joint Ministerial Monitoring Committee meeting that it would begin tapering production cuts by 2 million b/d over August to December. However, over-compensation by past laggards means that the actual taper is expected to be about 1.1 million b/d.
The rolling back of the cut was unlikely to result in an immediate rise in crude throughput and oil products output due to the fragility of the global fuel demand recovery, market sources said.
"After initiating a gradual withdrawal of the production cuts on Wednesday, the alliance is letting go of the reins to some extent and relying more on external factors again," Eugen Weinberg at Commerzbank said.
Fears of a second-wave of the global pandemic have sparked again, after the US recorded 138,358 fatalities along with 3,576,221 cases of COVID-19, according to data from Johns Hopkins University's Coronavirus Resource Center.
"Risks remain on the demand side because renewed lockdowns are possible and demand may rise more slowly than anticipated as a result of the recession and changed consumer behaviour. OPEC expressed concern yesterday that a second corona wave could destroy its efforts to rebalance the oil market." Weinberg said.
Some remain bullish on the recent production cuts, however.
Monica Malik, chief economist at Abu Dhabi Commercial Bank said, "We do expect the supply-demand mismatch to reverse in July, where demand outstrips supply, thanks to the [OPEC+] supply cuts."
Despite the challenges presented by the rising cases of infections, the overall picture looked mildly optimistic for oil, analysts say.
In its closely watched Monthly Oil Market Report released July 14, OPEC boosted its forecast of 2020 oil demand by 130,000 b/d to 90.72 million b/d.
And in its first 2021 market outlook, OPEC projected oil demand would surge to 97.72 million b/d, still below pre-pandemic levels but an acute recovery from the hard-hit second quarter of 2020.
