Crude-oil prices climbed on Thursday after a report that major producers at a an OPEC-led meeting of the Joint Ministerial Monitoring Committee, or JMMC, planned to make up for failing to fully meet their production-cut targets last month.
The JMMC, which monitors compliance with OPEC output quotas, held gathering via video-conference Thursday, with technical difficulties preventing a livestream of the meeting.
Earlier this month, the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed to extend cuts of 9.7 million barrels per day to July and monitor compliance to those reduction efforts monthly.
OPEC+ fell short of that target by 1.26 million barrels a day, but that volume will be compensated in full in the coming months, a delegate told Bloomberg News.
The news agency reported that Iraq told the committee that it plans to stick to its production-cut pledge this month and agreed to terms to make up for missing its target last month.
Iraq had pledged to cut production by more than 1 million barrels per day, but instead fell short of its target by 573,000 barrels, Bloomberg reported, citing delegates. To compensate, Iraqi oil production will be 57,000 barrels a day below its quota in July, and 258,000 barrels a day lower in August and September, the report said.
Overall, OPEC+ compliance in May was 87%, reported Reuters, citing two unnamed two OPEC+ sources.
West Texas Intermediate crude for July delivery CL.1,
Global benchmark Brent oil for August delivery BRNQ20,
Amena Bakr, deputy bureau chief at Energy Intelligence, had tweeted earlier Thursday that countries that have produced oil above their quota, such as Iraq, Kazakhstan and Nigeria, would be presenting plans to comply.
Meanwhile, energy demand remains in question as several U.S. states have seen a record number of new COVID-19 cases and a new outbreak in Beijing led the Chinese capital city to shut schools and cancel commercial flights.
“The news had traders wondering about a potential new second wave of the [COVID-19] virus,” said Phil Flynn, senior market analyst at The Price Futures Group. “They feared that what had been an impressive comeback in global energy demand could be thwarted.”
However, traders are torn—”trying to balance the risk of a second wave versus the chances that the increase may not be a second wave, but just a reflection of better testing,” he said in a daily report.
The U.S. government’s top infectious disease expert, Dr. Anthony Fauci told The Wall Street Journal on Tuesday: “People keep talking about a second wave. We’re still in a first wave.”
“It is also unlikely that the global economy will shut down, so at some point, oil traders might focus on the fact that global demand is recovering exceptionally well, and global production is still falling,” said Flynn. “That trend, assuming we do not take a big coronavirus to step back, means that we could see a very tight global oil market later this year, despite what OPEC says.”
Data from the Energy Information Administration released Wednesday revealed a weekly climb in U.S. crude inventories of 1.2 million barrels. They also showed supply declines of 1.7 million barrels for gasoline and 1.4 million barrels for distillates, which include heating oil.
Among the products traded on Nymex Thursday, July gasoline RBN20,
Natural-gas futures traded little changed Thursday after the EIA reported that domestic supplies of the commodity in storage rose by 85 billion cubic feet for the week ended June 12.
On average, analysts polled by S&P Global Platts expect the report to show a weekly climb of 79 billion cubic feet, which was less than the 111 billion cubic foot addition in the corresponding week last year.
July natural gas was at $ 1.643 per million British thermal units, up 0.3%.
