Oil prices edged down on Tuesday (18th of August, 2020). It was largely holding back overnight gains after OPEC + said producers were almost fully compliant with production cuts to support prices amid falling fuel demand due to the coronavirus pandemic.

Opec + oil production cut compliance was seen around 97% in July. The two OPEC + sources told Reuters about this. Oil producers are limiting production to record highs to reduce supplies worldwide. It is due to falling demand due to the pandemic.

However, the Organization of the Petroleum Exporting Countries (OPEC) and its ally known as OPEC + in August reduced agreed cuts to 7.7 million barrels per day (BPD) from 9.7 million BPD previously. The producer club cannot allow prices to fall too far.

It is based on member economies which are heavily dependent on the revenues generated by petroleum exports. That was what the Eurasia Group said in a note. However, the US producers are also taking advantage of supply cuts led by OPEC and Russia.

Compliance Brings the Positive Effect

The US Energy Information Administration lowers the forecast about oil demand last week. It was indicating a smaller-than-previously estimated reduction in global inventories. The high adherence of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC +.

That was done to supply cuts that have offset fears of falling demand due to the lockdown. For your information, the price of Brent crude oil futures for October delivery edged up nine cents to the US $ 45.46 per barrel. How about the others?

Meanwhile, West Texas Intermediate (WTI) crude oil futures for September delivery ended stagnantly. It was at the level of US $ 42.89 per barrel. On Tuesday (18/8), the technical panel found that compliance with OPEC + oil production cuts in July was between of 95%-97%.

OPEC + also reduced its supply cut in August to 7.7 million barrels per day (BPD) from 9.7 million barrels per day earlier. The plan is for OPEC + to hold a ministerial panel meeting. Based on the information, it will be held soon in this week.

The Effect of COVID-19

The ministerial panel meeting is anticipated that OPEC + will communicate that it demands strict compliance from all members. It will support the success of its actions to date. Even so, the coronavirus pandemic, which has been raging for months, shows no signs of abating. 

World Health Organization regional director, Carissa Etienne, said that nearly 11.5 million have been infected. Besides, more than 400,000 people have died from the pandemic in the United States. Apart from that country, Brazil is also listed as a country with the biggest coronavirus patients.

There are still many concerns about the COVID-19 pandemic. Besides, there are still concerns about a lack of agreement in Congress for stimulus. It is the statement given by Phil Flynn, the senior analyst at Price Futures Group in Chicago. It is reasonable. 

US Crude Oil Stocks Down

On the other hand, the US Congress has so far failed to approve a follow-up fiscal assistance package targeted at the US $ 1 trillion. Earlier, it was planned to stem the economic collapse caused by the pandemic. The different things happened in some countries.

In the European Union, several countries have renewed travel quarantines because of pandemic. That was impacting the demand for jet fuel and motorbikes. The most crucial risk to the physical (oil) market is now over. It was said by the Australian miner.

Industry data from the American Petroleum Institute (API) showed after yesterday's market close, crude inventories fell by 4.3 million barrels to about 512 million barrels. It means that it was bigger than analyst expectations for a withdrawal of 2.7 million barrels.