Oil drops after OPEC+ agrees to supply boost

Oil drops after OPEC+ agrees to supply boost

Oil dipped after OPEC+ agreed to boost their collective production into 2022, by adding 400,000 barrels a day each month from August. This is to restore all the cuts they made at the start of the Covid-19 pandemic.

Brent crude fell 0.4% in early Asian trading after losing 2.6% last week, while West Texas Intermediate slipped. The deal also gives Saudi Arabia, the UAE, Iraq, Kuwait and Russia higher baselines against which their output cuts are measured from May 2022.

Brent for September settlement was 0.4% lower at US$73.30 a barrel on the ICE Futures Europe exchange at 6:15 a.m. in Singapore.

WTI for August delivery fell 0.2% to US$71.67 a barrel on the New York Mercantile Exchange.

The rapid spread of the delta variant has clouded the path to recovery. After soaring 45% in the first half, Brent hit a turbulent patch this month. 

Oil markets analyst at Rystad Energy, Louise Dickson, said in a note that with the spread of the variant, OPEC+ should take an even more cautious approach, only raising production by 100,000 to 200,000 barrels per day, month-on-month in August. 

Cases of the delta variant have surged across Europe and Asia in recent weeks, leading to new travel and movement restrictions. The U.K. on Monday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions to visitors from the U.K.

Damon Harrison
Market Analyst, IPG Group