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Oil Talking Points
The price of oil[2] pulls back from a fresh monthly high ($43.78) even though US Crude Inventories contract for six consecutive weeks, and energy prices may continue to consolidate over the coming days as the Organization of the Petroleum Exporting Countries (OPEC) gradually rollback the voluntary production cuts in response to COVID-19.
Fundamental Forecast for Oil: Neutral
The price of oil may continue to retrace the decline from the March high ($48.66) as it breaks out of the range bound price action from earlier this month, with the developments coming out of the Joint Ministerial Monitoring Committee (JMMC) meeting doing little to detail the recovery in crude prices even though OPEC and its allies “observed that there are some signs of gradually improving market conditions, including the inventory build in July 2020 being reversed and the lessening of the gap between global oil demand and supply.”
It seems as though as OPEC and its allies will continue to coordinate throughout the remainder of the year as the press rerelease from the August JMMC meeting emphasizes the “ongoing positive contributions of the Declaration of Cooperation (DoC) in supporting a rebalancing of the global oil market,” but the expiration of the COVID-19 compensation mechanism[3] may rattle the recovery in crude prices as companies like Lukoil, one of Russia’s largest oil producer, increased production in earlier August according to the company’s second quarter earnings report.
It remains to be seen if demand will continue to recover ahead of the next JMMC meeting scheduled for September 16-17 as OPEC’s most recent Monthly Oil Market Report (MOMR) states that “world oil demand in 2020 is estimated to decrease by 9.1 mb/d, adjusted lower by around 0.1 mb/d ascompared to
